By Prof. Al Mariam,
Last week, the U.S. Securities and Exchange Commission announced an agreement in which the dictatorship of the Tigrean People’s Liberation Front (TPLF), the ruling regime in Ethiopia, agreed to pay some USD$6.5 million dollars in “disgorgement” (a legal act by which someone who has obtained profits or something of value by illegal or unethical acts is forced to return the ill-gotten gains to the rightful owner) for selling unregistered bonds over a period of 4 years. The SEC announcement is an extraordinary legal development.
This commentary may appear to be a bit technical and infused with legalese (legal speak) for some readers.
But the substance of the discussion is not technical at all. It is a simple story of a massive fraud perpetrated by the TPLF against Diaspora Ethiopians in the United States of America.
It is a story of how the TPLF used the pretext of raising funds for the so-called Renaissance Dam to effectively extort and bleed its Diaspora Ethiopian supporters and others seeking its good favors in the U.S.
It is a story of how the TPLF conducted a 4-year shakedown of Diaspora Ethiopians in the U.S. by disguising a protection racket in a bond sale program. Fraud and corruption are a way of life for the TPLF criminal enterprise.
Indeed, fraud and corruption are the hemoglobin and plasma in the TPLF body politic.
Ethiopia under the TPLF is the only country in the world for which the World Bank has prepared a massive 448-page corruption study entitled, Diagnosing Corruption in Ethiopia. The real story of the TPLF conspiracy to defraud and victimize Diaspora Ethiopians is yet to be told.
The action by the U.S. Securities and Exchange Commission announced on June 8, 2016 is only the tip of the iceberg of TPLF criminality in the U.S.
For nearly four years, I have spoken publicly and written in my Monday Commentaries that the so-called Renaissance Dam Bonds are worthless securities and a bogus creation of TPLF scammers and con artists to scalp Diaspora Ethiopians and fill their pockets and off shore accounts.
I feel fully vindicated in the SEC Order that my warnings a little over 3 years ago came true precisely as I predicted.
While I would have been more pleased if the TPLF had refrained from committing crimes in the U.S., (and there is absolutely no question whatsoever that selling unregistered bonds in the U.S. is a crime, See “Securities Act of 1933”, sec. 20 (b)), the fact that the TPLF was caught with their hands in the cookie jar and held accountable for their criminal activities gives me infinite pleasure.
I have made a number of predictions about the TPLF over the years. I believe quite a few of them have come to pass. I will now predict that the TPLF will be held to account for all its high crimes, crimes against humanity and misdemeanors it committed in Ethiopia.
When? Ask the T-TPLF. They know!
But… I told them so!!!
I told the TPLF ignoramuses not to do it!
I told the TPLF criminals not to sell unregistered bond in the U.S.A. (A “bond” is a debt investment in which an investor usually loans money to a governmental entity which borrows the funds for a defined period of time at a variable or fixed interest rate for a specific purpose such as a public project.)
I even told the TPLF criminals how to do it right; to do it legally; to do it with respect to American laws and the U.S. Constitution.
I did! I did!! I did!!!
But the TPLF thugs kept on selling unregistered securities in the U.S. just like the Mafiosi keep on doing extortion, loansharking and racketeering with knowledge of the criminal nature of those acts.
Why did the TPLF kept on selling illegal unregistered securities in the U.S. after they were publicly warned what they were doing is without a doubt criminal?
The answer is simple:
The TPLF thugs for over two decades have been getting away with murders and massacres.
The TPLF thugs for over two decades have been getting away stealing elections. Last year, they claimed to have won 100 percent of the votes. Yes, 100 percent!
The TPLF thugs have been getting away for over two decades stealing billions of dollars and stashing it in off shore banks and investments abroad. (According to Global Financial Integrity (GFI), “Ethiopia, which has a per-capita GDP of just US$365, lost US$11.7 billion to illicit financial outflows between 2000 and 2009.”)
The TPLF thugs for over two decades have been getting away stealing and converting U.S. aid to strengthen their “apparatus of control” as Human Rights Watch documented in its report, “One Hundred Ways of Putting Pressure: Violations of Freedom of Expression and Association in Ethiopia.”
The TPLF thugs for over two decades have been getting away committing all types of crimes inside Ethiopia and flouting the rule of law using their monkey courts and parliaments.
The TPLF thugs for over two decades have been getting away with monumental crimes against humanity as they massacred hundreds of thousands of innocent Ethiopians.
The TPLF thugs for over two decades have been getting away with one crime after another, confident in their belief that there is nothing under the sun that could hold them accountable, including the U.S. Government.
TPLF thugs came to America and sneered at American laws and kept on selling unregistered securities, and thought they would get away with it.
The TPLF thugs came to America and fleered at the U.S. Constitution and kept on selling unregistered securities, and thought they would get away with it.
The TPLF thugs came to America and though they could profiteer flouting American state laws and constitutions, and thought they would get away with it.
The TPLF kept on selling unregistered securities in the U.S. for years because they believed they could get away with it.
In the end, the TPLF thugs learned a hard lesson. The United States of America is not Ethiopia, and the T-TPLF is not Wall Street!
There is a price to be paid in America for racketeering in bogus bonds. I warned the TPLF NOT to do it on May 6, 2013
On May 6, 2013, in my commentary, “Shadowboxing Smoke and Mirrors”, I told the TPLF, a terrorist organization listed in the Global Terrorism Data Base, that selling unregistered securities in the United States is a crime and they should stop committing crimes in the U.S.:
Criminal violations in selling unregistered securities in the U.S.
There have been questions raised about the legality of the sale of Meles Dam bonds as “securities” in the U.S. Under federal and most state laws, a “security” is broadly defined and includes stocks, bonds, debt and equity securities, notes, investment contracts, etc. Unless exempted, all securities must be registered with the Securities and Exchange Commission (SEC) and/or relevant state agencies prior to selling or offering for sale to the public.
A security which does not have an effective registration statement on file with the SEC and/or the relevant state agency is considered an unregistered security. Buying or selling unregistered securities is a crime under federal and state laws.
The SEC can prosecute issuers and sellers of unregistered securities under section 20(b) of the Securities Act of 1933 (which regulates original issuers) and seek injunctions if the Securities Act has been violated, or if a violation is imminent. Section 8A also allows the SEC to issue orders to issuers of unregistered securities to cease and desist and seek civil penalties under Section 20(d) if an issuer violated the Securities Act, an SEC rule, or a cease-and-desist order.
Like most states, California Corporations Code sections 25110-25118 set strict guidelines for any securities sold in that state. Any person or entity who willfully sells or transports unregistered securities through interstate commerce or buys such securities could face serious criminal liabilities under California Corporations Code section 25540, subd. (a) with penalties of incarceration for up to three years and a fine up to $1 million. California prosecutors, like their federal counterparts, could also seek injunctive relief and civil penalties.
There are a few limited exemptions to the registration requirement. One of them is an exemption “for certain foreign government securities brokers or dealers”.
Pursuant to 17 CFR 401.9, “A government securities broker or dealer (excluding a branch or agency of a foreign bank) that is a non-U.S. resident shall be exempt from the provisions of sections 15 C(a), (b), and (d) of the Act (15 U.S.C. 78o–5(a), (b) and (d)) and the regulations of this subchapter provided it complies with the provisions of 17 CFR 240.15a–6…” In other words, the bond “brokers and dealers” sent to the U.S. to sell the Meles Dam bonds must meet the multifarious requirements of federal securities law and other regulatory requirements including full disclosure, proof of maintenance of required books and records relating to the bond issues and written consent to service of process for any civil action arising from disputes in bond related transactions. It is highly unlikely that the “brokers and dealers” selling the Meles Dam bonds in the United States qualify under 17 CFR 240.15a–6 and 15 U.S.C. 78o–5(a).
On June 8, 2016, an announcement by Securities and Exchange Commission (SEC) fully vindicated my warnings of May 8, 2013.
The SEC announcement stated:
Ethiopia’s electric utility has agreed to pay nearly $6.5 million to settle charges that it violated U.S. securities laws by failing to register bonds it offered and sold to U.S residents of Ethiopian descent.
According to the SEC’s order:
Ethiopian Electric Power (EEP) conducted the unregistered bond offering to help finance the construction of a hydroelectric dam on the Abay River in Ethiopia.
EEP held a series of public road shows in major cities across the U.S. and marketed the bonds on the website of the U.S. Embassy of Ethiopia as well as through radio and television advertising aimed at Ethiopians living in the U.S.
EEP raised approximately $5.8 million from more than 3,100 U.S. residents from 2011 to 2014 without ever registering the bond offering with the SEC.
The settled findings in the SEC Order specify,
the EPP offered unregistered bonds to U.S. residents of Ethiopian origin to help finance construction of a hydroelectric dam in Ethiopia. The bonds were offered in the U.S. through television and radio advertisements targeted at the Ethiopian diaspora community. Bonds were offered for sale through the website of the Embassy of Ethiopia in Washington, D.C., which also sponsored events to promote bond sales. EEP did not register its bond offering with the Commission, and there was no available exemption from the requirement that the offering be registered. EEP’s unregistered offer and sale of securities in the U.S. violated Sections 5(a) and 5(c) of the Securities Act.
Section 5(a) provides it is unlawful for any person to sell securities in interstate commerce by any means without a registration statement or to transport securities for sale delivery after sale without prior registration.
Section 5(c) provides it is unlawful for any person to sell or offer to buy any security, unless a registration statement has been filed or while the registration statement is the subject of a refusal order or stop order or other legal challenge.
(See also 15 U.S. Code sec. 77e)
The principal purpose of the SEC Order is to “ensure that investors get all of their money back plus interest.”
The BIG unanswered questions in the SEC Order
Questions Set #1:
According to the SEC, “EEP shall pay a total of $6,448,854.87 consisting of disgorgement of $5,847,804 and prejudgment interest of $601,050.87.” This figure appears to be a tiny fraction of the money officially claimed to have been gathered by T-TPLF officials.
According to statements of TPLF officials on March 16, 2016:
Of the total finance mobilized for the project, much of the figure, about 6.96 billion Birr or 377.52 Million USD was generated from domestic sources while about 0.6 billion Birr and 0.092 Million Birr were obtained from Diaspora community and donations respectively.
Even after factoring Ethiopian Diaspora contributions from various countries, it seems Diaspora Ethiopians in the U.S. were by far the largest purchasers of Renaissance Dam Bonds. It seems that 0.6 billion Ethiopian Birr would have a conversion value of approximately USD$28 million. What percentage of the total Diaspora bond purchases came from Diaspora Ethiopians in the U.S.? One can reasonably infer from official TPLF statements that the share of bond purchases by Diaspora Ethiopians is far greater, possibly two to three times more than the amount the TPLF settled for in the SEC Order. By agreeing to settle for nearly USD$6.5 million, did the TPLF get away like a robber even after it was caught like a robber?
What proof is there showing that the money collected from Diaspora Ethiopians actually went to the so-called Dam project instead of TPLF pockets?
Questions Set #2:
Why did the TPLF continue to sell unregistered bonds for at least 4 years and particularly after they were informed in clear and unambiguous terms that they were committing a crime? Did the TPLF do minimal due diligence before selling unregistered securities in the U.S.? Did the TPLF seek legal counsel or advice in the U.S. when it launched its unregistered bond sales in the U.S.?
Was the TPLF represented by legal counsel in its sale of unregistered bonds prior to the SEC action? If the TPLF did not seek legal counsel in the U.S., why did it fail to do so?
The TPLF has paid USD$50 thousand per month to the law firm of D L A Piper to defeat legislation aimed at ensuring human rights in Ethiopia. Why did it fail to seek legal counsel in its efforts is to sell bonds in the U.S.? (***In a memo sent to congressional offices, DLA Piper, “representing Ethiopia”, argued, “The terms ‘political prisoners’ and ‘prisoners of conscience’ are undefined and mischaracterize the situation in Ethiopia,” and should be removed from a bill that condemned the Ethiopian regime for detaining opposition activists.***)
The official “Great Millennium Dam Bond Brief Description” clearly demonstrates that the TPLF had substantial knowledge of the legal requirements in offering to sell unregistered bonds. Did the TPLF knowingly, deliberately and intentionally sell unregistered securities in the U.S. with the intent to defraud? Are the TPLF so clueless and so ignorant that they had no idea that selling bonds is the same as selling used clothes at a flea market? Did the TPLF avoid the mandatory registration process of its bond offering or seek exemption because 1) it intended to defraud Ethiopian Diaspora investors, 2) conceal information on the bond that would show that the bond offering is a fraud and a scam, and 3) did not want to make its fraudulent prospectus available for public scrutiny.
Questions Set #3:
In December 2014, the TPLF marketed a 10-year Eurobond which allegedly raised $1 billion to fund electricity, railway and sugar-industry projects. “The 10-year bonds priced to yield 6.625 percent, at the lower end of the 6.625 to 6.75.”
The Renaissance Dam 5-10 bonds offered to Diaspora Ethiopians in the U.S. had LIBOR (London Interbank Offered Rate) of 1.25% (for a 5-year maturity date) to 2.0% (for an 8-10 year maturity date).
Why were Diaspora Ethiopians offered the short end of the stick?
Questions Set #4:
Under sec. 20 (b) of the “Securities Act of 1933”, the SEC “may transmit evidence of violation of the provisions of [the Securities Act] or of any rule or regulation prescribed under authority thereof to the Attorney General who may, in his discretion, institute the necessary criminal proceedings under this title.”
The SEC had an open-and-shut case, a slam dunk, against the TPLF. The SEC Order suggests there is ample evidence the TPLF acting through its electric power agency and embassy engaged in wire fraud, mail fraud and money laundering. Why didn’t the SEC refer the matter to the Justice Department for criminal prosecution?
It is clear from the SEC Order that the “Ethiopian Embassy” facilitated and made possible the sale of unregistered bonds by making such bonds purchasable online through its website, sponsoring events and other activities? Did the TPLF use its “Embassy” to commit bond fraud with knowledge that the “Embassy” personnel involved in the fraud are protected by diplomatic immunity?
Why didn’t the SEC refer the names of those officials at the “Ethiopian Embassy” to the Justice Department for prosecution for among other charges, conspiracy to sell unregistered, conspiracy to sell fictitious instrument, conspiracy to transport a fictitious instrument, attempting to sell and selling a fictitious instrument and transporting a fictitious instrument in interstate commerce?
Why didn’t the SEC transmit the evidence of criminal wrongdoing in this case to the Attorney General for prosecution given the flagrant 4-year pattern and practice of violation of the Securities Act by the TPLF, its embassy and other agencies under its control, supervision and guidance?
Is the SEC Order, a form of “plea bargain” offered to the T-TPLF to avoid criminal prosecution? In other words, did the TPLF readily agree to pay 6.5 million to avoid criminal prosecution and to avoid imprisonment of its Embassy officials, EPP personnel and others?
Why did the SEC order makes an implied finding of fraud instead of an express finding since there is ample and demonstrable evidence that the TPLF engaged in a 4-year bond scam aimed at defrauding Diaspora Ethiopians in the U.S.?
Questions Set #5:
The SEC Order acknowledges that the SEC “appreciates the assistance of the U.S. Department of State.” Exactly what kinds of “assistance” did the State Department provide to the SEC? Did the State Department participate in the negotiations between the “Government of Ethiopia” and the SEC? Did the State Department facilitate a deal between the “Government of Ethiopia” and the SEC? Did the State Department use political pressure to prevent criminal prosecution of TPLF agents?
Questions Set #6:
Under the Securities Act, the SEC may not bring actions on behalf of individual investors, but the Securities Act allows individual investors to bring civil actions under several provisions:
What are the rights of Diaspora Ethiopian investors and bondholders victimized by the T-TPLF unregistered bond scam under section 11 of the Act ?
What are the rights of Diaspora Ethiopian investors and bondholders victimized by the T-TPLF under sections 5 and 12(a)(1) which allow purchasers to sue sellers for offering or selling a non-exempt security without registering it?
What are the rights of Diaspora Ethiopian investors and bondholders victimized by the T-TPLF under section 15 which helps investors by making “control persons,” or persons who “control” defendants liable under Sections 11 and 12 by owning stock or under agency principals, jointly and severally liable?
What are the rights of Diaspora Ethiopian investors and bondholders victimized by the T-TPLF under section 17(a) which provides for liability for fraudulent sales of securities? Or under section 10b of the Securities Exchange Act and Rule 10b-5 (principal provisions against fraud)?
Questions Set #7:
Is the sale of unregistered bonds the tip of the iceberg in TPLF crimes in the U.S.? What other crimes have been committed and continue to be committed by the T-TPLF in the U.S. against American citizens or laws?
In 2014, an American citizen known as “Mr. Kidane” (pseudonym used to protect his identity) sued the “Ethiopian Government” “for infecting his computer with secret spyware, wiretapping his private Skype calls, and monitoring his entire family’s every use of the computer for a period of months.”
Is the TPLF secretly still conducting illegal wiretapping of American citizens in violation of U.S. laws and the U.S. Constitution?
Questions Set #8:
What legal recourse do states in which the TPLF sold unregistered bonds have in terms of holding the TPLF accountable?
For instance, under California Corporations Code sections 25110-25118, 25540 set strict guidelines for any securities sold in that state. Any person or entity who willfully sells or transports unregistered securities through interstate commerce or buys such securities could face serious criminal liabilities under California Corporations Code section 25540, subd. (a) with penalties of incarceration for up to three years and a fine up to $1 million.
Is the TPLF legally accountable under California state law, independent of its settlement with the SEC, for violations of the above-referenced sections of the Corporations Code?
Questions Set #9:
Who can Ethiopian Diaspora investors and Dam bondholders call to get more information on the TPLF scam?
Investors seeking more information should contact the administrator of the distribution, Gilardi & Co. LLC, at 844-851-4591.
Questions Set #10:
Given the scope and magnitude of the TPLF bond fraud in the U.S., is a Congressional investigation warranted?
What evidence does the SEC have that it has not publicly disclosed concerning the TPLF fraud?
Is the SEC Order the final chapter in the case?
The SEC Order is not the end of the TPLF fraud and crime spree investigation in the U.S.
It is just the beginning!