Friday, October 10, 2014

A short history of Vanuatu citizenship sales

As Vanuatu introduces dual citizenship, it does no harm to review where we have gone wrong – most voters would agree – with citizenship for sale in the past.

This excerpt concerning Vanuatu from an article from 2007 reviews the situation back then …

Commonwealth and Comparative

Politics (2007) Volume 45, Number 2,

Pages 138-163.

Citizenship For Sale: Passports of

Convenience From Pacific Island Tax

Havens1

By

Anthony van Fossen

Griffith University

e-mail: a.vanfossen

Pacific Island tax havens have apparently collected $153,450,000 from (mostly ethnic

Chinese) purchasers of passports. This paper considers the evolution of passport sales in

Tonga, Samoa, the Marshall Islands, Vanuatu and Nauru and internal and international

opposition to them. Tension exists between different conceptions of citizenship within the

world-system. Sales reflect classical liberal, individualistic, free market conceptions of

citizenship. Opponents invoke both conservative and democratic conceptions of

citizenship. The paper favours democratic solutions to many problems sales create.

Sales schemes involve secrecy, corruption, and facilitate crime—which attenuates

following exposure by media, opposition politicians, watchdogs and crusaders against

international terrorism. Pacific Island havens currently have no legal, official passport

sales schemes, but the paper demonstrates that they probably continue.

In 1995 and 1996 it appears that at least 2,000 Marshall Islands passports sold for at least $11,000 each—produced revenues of $22m (about 11% of GDP per year).

VANUATU

Attempts to establish schemes in Vanuatu OFC have required state co-operation to waive its ten-year residency requirement for citizenship and lift its dual citizenship prohibition.

Many failed when fraudulent connections were publicised. In 1994 John Avram, former CEO of failed Australian tourism property developer Interwest (who had breached Australian corporations law), and Melbourne associates proposed a A$400m five star tourism complex on Moso Island, with a bank, a casino, its own companies register, financial markets, and a business migration programme (involving Vanuatu citizenship, passports and residence) for investors (Armstrong and Gross 1995:76, 232, 297-8, Vanuatu Weekly 24/2/96, 14/9/96). Although the government approved the scheme it never eventuated. In July 1994 he Olilian Group proposed a new bank, OFC and export processing free trade zone (FTZ), with government approval, to entice about 3,000 wealthy Asian passport purchasers to settle in Luganville on Espiritu Santo. It included residential, hotel, commercial and medical developments. It failed when promoters were charged with fraud in July 199516.

On 20 June 1997 Vanuatu’s Minister of Foreign Affairs Vidal Soksok, advised by Prime Minister Serge Vohor, gave the Resort Las Vegas Group (a.k.a. the South Pacific Immigration Authority) exclusive rights to sell Vanuatu citizenships. Jai Yong (Richard) Jung (a.k.a. Sung Ho Jung), the principal of Resorts Las Vegas, was granted citizenship and an official passport (as trade commissioner to South Korea) despite only fifteen

months’ Vanuatu residence and his retention of South Korean citizenship. He had a criminal conviction and had fled South Korean securities fraud charges. Jung claimed he would build a $100m hotel and casino at Tukutuku in western Efate. His citizenship programme for 60,000 to 80,000 people (a tax haven refuge for Asians) was supposed to bring the government over $350,000,000 and probably more to Jung and other middlemen, based on $17,000 to $25,000 per passport. This would increase Vanuatu’s citizens by 50% and change its ethnic and class character drastically. The country’s ombudsman Marie-Noëlle Ferrieux Patterson exposed the scheme’s fraudulent elements (Patterson 1997), attracting considerable media attention, and it failed to attract the necessary two-thirds legislative majority.

In October 1997 Interim Prime Minister Vohor’s government approved the plan of

Volani International (a Gibraltar OFC registered Italian firm) to establish a ‘state within a state’ on Espiritu Santo. Volani promised an OFC, FTZ, upgraded airport, luxury and low-income housing, and a large casino-hotel complex for Asian visitors. Volani was to transfer the international airport to the Vanuatu government after twenty-five years (Patterson 1998a; Vanuatu Trading Post, 11/7/98, 22/2/99; Vanuatu Weekly, 5/11/97,

21/2/98).

On 22 July 1999 Vanuatu’s Deputy Prime Minister, Willie Jimmy, and Lord Keyes,

representing the Mondragon Group, signed a Memorandum of Understanding in

London’s House of Lords. Mondragon’s associate, Nevada real estate developer Michael Oliver, had sponsored tax haven-oriented secessionism in the New Hebrides-Vanuatu since the mid-1970s. He attempted to create a new (libertarian-based) country and sell citizenship to thousands of settlers. His ‘Republic of Vemerana’ briefly controlled

Espiritu Santo in 1980 until Papua New Guinean troops defeated it and restored the island to Vanuatu (van Fossen 2001). Mondragon proposed to develop a FTZ on 80,000 hectares of land in Big Bay, Espiritu Santo; to operate Vanuatu’s consular offices around the world (beginning with Israel, Belgium and Michigan); and to engage in exclusive Internet activities, air services and fishing.

The FTZ would have its own currency, postal service and OFC. On 17 December 1999 Vanuatu’s Council of Ministers approved the project and on 28 January 2000 it appointed Israel’s Major General Daniel Rothschild, Mondragon’s choice, as Vanuatu’s Honorary Consul in Tel Aviv. Vanuatu’s Foreign Investment Review Board approved Mondragon’s FTZ in principle on 26 July 2000.

Obstacles developed in August 2000 when the Vanuatu Trading Post newspaper exposed the dubious past of Oliver’s colleague Stefan Mandel (Mondragon’s man The scandal deepened in June and July 2001, with the revelation of Mandel bankruptcy in Australia in 1995. Oliver severed connections with Mandel and his projects on 11 October 1999; an Israeli court ordered Mondragon to stop offering its shares there without a prospectus; and investors in a betting syndicate run by Mandel (which won $27m on the Virginia lottery) complained that they were not paid. Finally, the new Ombudsman Hannington Alatoa concluded that Mandel had financially assisted Willy Jimmy and three other government officials improperly (Alatoa 2001). From 1997 media scandals concerning Vanuatu’s passport sales continued. Deposed cabinet minister Jimmy accused senior officials at Prime Minister Vohor’s office

illegally selling passports to unqualified Asian businessmen–between fifty (Jimmy’s figure) and three hundred (anonymous government estimates) were sold, reputedly costing $8,000 to $25,000. Honorary Consul positions in Macau and Hong Kong allegedly cost about $90,000 each. Vanuatu’s government apparently received no proceeds. The media scandal continued until several civil servants resigned17.

In March 1998 the Ombudsman reported the illegal issue of numerous ordinary,

diplomatic and official passports since 1993 under instruction from high government officials—particularly Korman, Jimmy, Vohor and Soksok. Recipients included people with criminal, or dubious, histories, or no recorded address. It was impossible to determine how many ordinary passports were issued to foreigners; at least 29 diplomatic and 42 official passports were granted (only six of these being formally accepted by a receiving country)18. The Ombudsman was concerned about possible abuses of exemptions granted with diplomatic and official passport–to carry drugs, ‘dirty’ money, or weapons. The Ombudsman detailed direct or indirect improper payments to Vohor, Jimmy, and Soksok. Scandals continued with the suspension of Citizenship Commission Secretary General, Kepouwe Manwo, accused of illegally issuing passports, in March 2003. Ironically, all powers concerning citizenship were transferred from Manwo to Jean Sese–previously suspended for unlawfully issuing a passport to Richard Jung of Resorts Las Vegas and issuing 64 passports to ineligible foreigners (Patterson 1998b, Vanuatu Trading Post 6/3/03).

In one year (probably its most active one 1996-1997) Vanuatu received about $3.3m for three hundred passports; approximately 1!% of its gross national product. Suggestions (with alarm in 2001) continue of significant illegal sales (Far Eastern Economic Review 5/4/01).

Vanuatu’s international reputation was damaged and some countries (e.g.,

Canada) dropped visa waivers for Vanuatu’s nationals (Ottawa Citizen 5/12/01,

Vancouver Sun 7/12/01).

vanuatudaily.wordpress.com 8 Dec 2013

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