The Need for Beneficial Ownership Disclosure with Government Contracts

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The following is by Christine Clough of the Task Force on Financial Integrity and Economic Development and was on their blog today and is reproduced with permission:

Who is Mina Corp and why is the U.S. government doing business with it?  Last week Andrew Higgins and Walter Pincus at the Washington Post wrote an article highlighting the U.S. military’s connection with this fairly mysterious company.  The Subcommittee on National Security and Foreign Affairs of the U.S. House of Representatives’ Committee on Oversight and Government Reform is investigating the contracts awarded to Mina Corp and its associated form Red Star Enterprises and is expected to publish a report on its findings sometime this month.  While we wait for the report from Congressional investigators, let’s take a closer look at risks such secrecy poses for our integrity and national security.

Mina Corp Ltd and Red Star Enterprises are registered in Gibraltar, which is a secrecy jurisdiction.  These jurisdictions, sometimes also referred to as tax havens, can be used to facilitate tax evasion, money laundering, and other illegal activities.  The secrecy services Gibraltar and other jurisdictions provide prevent tax authorities in the United States, for example, from finding out who owns the company and how much its financial accounts contain.  Why is the U.S. government giving $3 billion in tax payer money to a company that has at least positioned itself to avoid coming under (some) U.S. business and taxation regulations?

If the Defense Department’s goal truly is “maximum transparency”, as it should be, then it should require — and publish — the beneficial owners of all companies to which it awards contracts.  Withholding such information prevents the media and civil society groups from adequately fulfilling their role as monitors of government activity, which is vital for democracy.  In no way would this harm national security or the particular missions in Iraq and Afghanistan, in the case of Mina Corp.  The beneficial owners of these companies are not the commercial equivalent of al-Qaeda operatives that have turned!  Fuel supplied by Mina Corp for the U.S. government needs protecting, not the names of the people making (I would imagine) millions of dollars from American taxpayers.

In today’s world of drugs and transnational terrorism, the United States cannot afford to do business with unknown entities.  Without requiring beneficial ownership disclosure, we cannot know for sure who benefits financially from these contracts.  The company is supposedly controlled by American business man Douglas Edelman and his Kyrgyz partner Erkin Bekbolotov, but this cannot be verified with the present level of secrecy.  An account manager in Gibraltar could be concealing additional ownership by someone, including a (corrupt) government official or even a terrorist.  Furthermore, if Mina Corp uses its secrecy to engage in corruption with officials in Kyrgyzstan, this could undermine the new government and the public’s attitude towards the United States, both of which could harm the security and effectiveness of U.S. troops stationed in the country.

Certainly, safe and adequate supplies of fuel for U.S. forces in Iraq and Afghanistan are vital.  However, the United States Central Command (CENTCOM) needs to better recognize its other obligations to the American public to dole out such huge and important contracts only to companies that behave in a responsible and transparency manner.  United States interests must be examined at all levels of analysis, not just the one for fuel.  Has CENTCOM not learned this lesson from Afghanistan yet?