NEWS RELEASE | The BOTA Foundation: A Model for the Safe Return of Stolen Assets?

By on January 20, 2017

FOR IMMEDIATE RELEASE
Contact: Chelsea Newhouse
 
 
We are pleased to announce the publication of The BOTA Foundation: A Model for the Safe Return of Stolen Assets?, the first in a series of reports from the Philanthropication thru Privatization Project (PtP) examining important examples of significant charitable endowments that have resulted from the sale or other transformation of government-owned or -controlled assets.
 
Prepared by international development specialist Aaron Bornstein and edited with an Introduction by PtP Project Director and Johns Hopkins University Professor Dr. Lester M. Salamon, this report analyzes the major example to date of the application of the PtP concept to stolen or disputed assets: the case of the BOTA Foundation in Kazakhstan, which arose from the seizure of assets totaling US$84 million that an American citizen secured from U.S. oil companies in the 1990s and channeled to high level officials in the Government of Kazakhstan in order to secure oil drilling rights in the Caspian Sea.
 
As such, it profiles one of over 550 charitable foundations that have emerged from some type of transaction transforming a government-owned or government-controlled asset into a charitable foundation. In the process, it helps point the way to the application of the PtP concept to other stolen asset restitution cases, as well as to other types of transactions involving state-owned or –controlled assets.

What is PtP?

Philanthropication thru Privatization—or PtP—is the name we have given to what turns out to be a wide assortment of privatization-type processes through which government-owned or controlled assets have been transformed in whole or in part into charitable endowments managed by private foundations. Such transactions have taken six different forms:

  1. Sale of state-owned enterprises;
  2. Transfer of ownership or control of other government assets (e.g. buildings, airports, cultural institutions);
  3. Streams of revenue generated by state-controlled business activities (e.g., lotteries, mining activities);
  4. Debt swaps;
  5. Conversions of quasi-public organizations into private for-profit businesses; and
  6. Restitution of stolen or stranded assets.

By vesting these resources in foundations, PtP offers a way to ensure that a nation’s people receive some direct benefits from such transactions that transform public assets into private hands. As noted, the PtP Project has identified over 550 foundations that have emerged from such privatization transactions—including some of the largest and most reputable foundations in the world. Properly designed and executed, PtP can revolutionize the charitable landscape of countries while transforming privatization into a “win-win” process for citizens, governments, and investors alike. It is to call attention to this possibility and promote its fulfillment that the PtP Project is dedicated, as detailed in Philanthropication thru Privatization: Building Permanent Endowments for the Common Good.

Stolen or Stranded Assets and the BOTA Case

Assets that have been abandoned by owners, generated from bribes, or imposed as penalties arising from illegal individual or corporate behavior represent one of the prime asset classes to which the PtP concept can be applied—and the BOTA case illustrates the way in which this can be successfully done.
 
The quantity of such assets around the world is enormous. In 2015 the United Nations estimated that “every year $1 trillion is paid in bribes while an estimated $2.6 trillion are stolen annually through corruption—a sum equivalent to more than 5 per cent of the global GDP.” While most of this money is never recovered, in some cases it is, leading to the critical question: What should be done with the resulting assets and how can they be protected and used for the benefit of the people from whom they were stolen?
 
While there is international agreement that such resources should be returned to the countries from which they originated, in cases where government entities are too complicit in the creation of the ill-gotten assets, where the likelihood is slim that the assets will be returned to a valid social purpose, and/or where public sentiment would not consider assignment of the proceeds to government authorities to be legitimate, alternative destinations must be considered. This was precisely the situation that led to the creation of the BOTA Foundation, and the BOTA case provides compelling evidence that a PtP-type solution—namely, the creation of a charitable endowment—offers a workable solution to this dilemma.
 
While BOTA has been cited as the most successful example of a transparent and accountable stolen asset return mechanism by major publications such as The New York Times and Financial Times and in more technical literature on asset recovery,1 no in-depth examination of its legal and political background, its history, its governance and management structure, its programs and impact, or its lessons has heretofore been available. With this case study, the PtP Project seeks to fill this gap and thereby provide those involved in future asset recovery cases a promising solution to what is always a critical dilemma in the asset recovery process, and a solution that has a proven track record in the context of other types of assets as well.
 
Download the full report, “The BOTA Foundation: A Model for the Safe Return of Stolen Assets?” here.
 
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1 See: Open Society Justice Initiative, Repatriating Stolen Assets: Potential Funding for Sustainable Development, 2013; Rick Messick, “How Asset Return Agreements Can Bolster Reform: The Kazakh Experience”, The Global Anti-Corruption Blog, March 3, 2016; Gretta Fenner-Zinkernagel, Charles Monteith, and Pedro Gomes Pereira, Emerging Trends in Asset Recovery, International Centre for Asset Recovery, Basel Institute on Governance. Bern: Peter Lang, 2013; World Bank, Stolen Assets Recovery Initiative, Left Out of the Bargain, Settlements in Foreign Bribery Cases and Implications for Asset Recovery, 2014.
 

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About the PtP Project | email
The Philanthropication thru Privatization (PtP) Project seeks to promote an option for the creation of independent charitable foundations around the world by capturing all or a portion of an assortment of “privatization” transactions involving the transformation of publicly-owned or -controlled assets into private wealth. The PtP Project is directed by Dr. Lester M. Salamon, a professor at the Johns Hopkins University and director of the Johns Hopkins Center for Civil Society Studies (CCSS). Administrative and technical support for the Project is provided by the East-West Management Institute (EWMI) with generous support from the Volkswagen, Charles Stewart Mott, and King Baudouin foundations as well as eight Italian foundations of banking origin through their Association of Italian Foundations and Savings Banks (ACRI). For more information about the PtP Project, visit p-t-p.org.
 
About Aaron Bornstein | email
Aaron Bornstein is an anti-corrupt ion expert with expertise in creating and leading the first foundation in the world established with funds from a U.S. Foreign Corrupt Practice Act settlement—the BOTA Foundation. From 2011 through the end of 2014, Aaron was the Executive Director of BOTA Foundation, the largest child and youth welfare support institution in Central Asia, where he was in charge of government and board relations, strategic visioning and execution, operations oversight including budget control, and representation to a diverse set of stakeholders. He has managed technical assistance and grants programs around the world dealing with diverse topics such as improving governance, child and youth welfare, and higher education strengthening. Throughout 2016 Aaron collaborated closely with PtP and Professor Lester Salamon on writing this case study on BOTA, and a “how to” paper on stolen asset return, expected to be published in 2017. Aaron has also been a consultant to the Stolen Assets Recovery Initiative of the World Bank and other nonprofit organizations. 
 
About Lester M. Salamon | email
Dr. Lester M. Salamon is a Professor at The Johns Hopkins University and Director of the Johns Hopkins Center for Civil Society Studies. He previously served as Director of the Center for Governance and Management Research at the Urban Institute in Washington, D.C. and as Deputy Associate Director of the U.S. Office of Management and Budget in the Executive Office of the President. Dr. Salamon pioneered the empirical study of the nonprofit sector in the United States and has extended this work to other parts of the world. Author or editor of more than 20 books, his recent works include: The Resilient Sector Revisited: The New Challenge to Nonprofit America (Brookings Press, 2015); Philanthropication thru Privatization: Building Permanent Endowments for the Common Good (il Mulino Press, 2014); The New Frontiers of Philanthropy: A Guide to the New Tools and Actors Reshaping Global Philanthropy and Social Investing (Oxford University Press, 2014); America’s Nonprofit Sector: A Primer, 3rd Ed. (Foundation Center, 2012); The State of Nonprofit America, Vol. 2 (Brookings Press, 2012); and Rethinking Corporate Social Engagement: Lessons from Latin America (Kumarian Press, 2010).

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