The Nigerian Land Deal That Didn't Happen

Site of Eko Atlantic on reclaimed land in Lagos

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Fox News had a story the other day that purported to catch my good friends in OBO doing underhanded real estate deals at the behest of The Clinton Foundation. Briefly, it was alleged that OBO is acquiring property for a future new construction project in Lagos, Nigeria, as payback to a big-bucks contributor to the Clintons.

State Department sought land deal with Nigerian firm tied to Clinton Foundation:

EXCLUSIVE: Shortly after Hillary Clinton left the Obama administration, the State Department quietly took steps to purchase real estate in Nigeria from a firm whose parent company is owned by a major donor to the Clinton Foundation, records obtained by Fox News show.

On March 20, 2013, William P. Franklin, an “international realty specialist” at the State Department, emailed Mary E. Davis, an American diplomat stationed in Africa, instructing her to “put on Post letterhead” an “expression of interest” by the department in purchasing property at Eko Atlantic, a massive real estate development off the coast of Lagos. Franklin further instructed that the signed letter was to be “delivered to Ronald Chagoury.”

The draft letter, also obtained by Fox News, was undated and addressed to Chagoury care of his firm South Energyx Nigeria Limited, a subsidiary of the larger Chagoury Group that is spearheading the Eko Atlantic real estate venture. The State Department letter sought, among other things, to confirm that the department could proceed with “acquisition of the real property … [at] the asking price of $1,250 per square meter.”

Overtures to real estate developers from State Department officials scouting locations for embassies, consulates and other diplomatic facilities would ordinarily not arouse interest. But in this case, the budding transaction – never completed, the department now says – raised eyebrows because Ronald Chagoury is the brother and business partner, in the Chagoury Group, of Gilbert Chagoury, a Lebanese-born businessman whom federal records show has donated between $1 and $5 million to the Clinton Foundation.

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The State Department’s outreach to the Chagoury family, looking to buy property from the brothers, came less than a month after former President Clinton himself toured the Eko Atlantic project – for the second time. The first occasion was the ground breaking, in 2009, in which the former president participated. By all accounts, Eko Atlantic represents a staggeringly ambitious undertaking: the dredging of millions of tons of sand from the sea floor off Victoria Island and the creation of an estimated 3.5 square miles of new land, on which the Chagourys aim to establish what they call a “21st century city … for residential, commercial, financial and tourist development.”

-- Snip --

“A month after Bill Clinton visits a Gilbert and Ronald Chagoury-run land project in Nigeria, the U.S. State Department wants to buy the same land,” said David N. Bossie, president of Citizens United, the conservative advocacy group whose litigation against the State Department pried loose the Franklin email and accompanying letter. “Who could be so lucky? A major donor to the Clinton Foundation, that’s who.”

A few things jump out as wrong with this expose. First, no property has been acquired, or even selected. Fox's smoking gun email said that OBO seeks to confirm the asking price, from which all we can conclude is that the Eko Atlantic site is under consideration for purchase.

Second, the property in question is only one of several possibilities that were identified by an outsourced professional real estate search and subsequently narrowed down to a short list by OBO’s site selection process.

Third, the search for property to build on in Lagos has been underway for over five years, as we learned when this matter was addressed during a State Department press briefing, and funds for property acquisition were requested in the FY2013 budget for Embassy Security, Construction, and Maintenance. See page 14 of this budget justification:

The FY 2013 funding will also support the acquisition of sites where NEC [New Embassy Complex] projects are planned in future years. Sites are being sought in Baku, Azerbaijan; Bangui, Central African Republic; Lagos, Nigeria; St. Petersburg, Russia; and Shanghai, China.

So, in fact, the Department did not decide to buy a Chagoury-run property, much less decide to build a new Consulate-General in Lagos, one month after Bill Clinton visited the site.

Now, I will concede that Press Relations Director Elizabeth Trudeau could have been given better media guidance when she discussed this matter at a press conference, but what she said was completely correct.

MS TRUDEAU: So a few points, okay, that I’d like to make of this. As of today, as of right now, we have not contracted or acquired property for a new consulate in Lagos. The site search for a new consulate in Lagos began in 2011, as prioritized by the Capital Security Construction Program. Many of the potential sites under consideration by the department, to include the Eko Atlantic development, were identified by an independent international real estate firm, as is typical in site searches around the world. The Eko Atlantic site was identified, as I said, by an independent international real estate firm in 2012.

The problem was the word "prioritized," which apparently lead the press to assume that OBO has been trying to buy the Eko Atlantic site ever since 2011, when what Ms. Trudeau actually said was that U.S. Consulate-General Lagos became a priority for a new construction project at that time.

Ms. Trudeau would have been better served if OBO had provided her with an explanation of what the Capital Security Construction Program is, exactly. Specifically, that it is a list of 80 posts all of which are prioritized for replacement with new buildings according to their degree of security vulnerability, and therefore Lagos has to wait its turn behind other, higher, priorities before it gets funding.

There is no mystery about the list of top 80 posts. Here is an impeccable short description of the Capital Security Construction Program by Under Secretary for Management Patrick Kennedy - the man himself - in testimony to Congress:

Each year, [Diplomatic Security] ranks all posts worldwide according to their security vulnerability and OBO uses this list to develop its top 80 Posts for the Department’s Capital Security Construction Program. These posts span all regions of the world. Replacement of these most vulnerable facilities is an ongoing effort.

And here is a recent OIG Report saying the same thing:

DS publishes a Vulnerability List, which ranks facilities according to their vulnerability across a wide variety of security threats on an annual basis, as mandated by SECCA. This list is then used to establish the Top 80 list of posts in which [New Embassy Compounds] are needed to reduce security vulnerabilities. The Top 80 list shows which posts are scheduled to receive a NEC. (Footnote, page 32)

SECCA is the Secure Embassy Construction and Counterterrorism Act of 1999, which mandated that the Department annually rank-order the top 80 candidates for new embassy construction funding. You can read the relevant text here. It's public law. Like I said, there is nothing mysterious or sensitive about it, and explaining it to the press might have helped Ms. Trudeau get her message across.

Ms. Trudeau's other big talking point likewise seemed to go over the heads of the press. OBO has an extensive and highly structured site selection and due diligence process that does, indeed, take a few years to complete.

"Our site search process, speaking specifically about this but also generally on how we operate, is managed by career real estate professionals in the Bureau of Overseas Building Operations with input from independent real estate firms and other department stakeholders, to include Diplomatic Security and overseas post. Career professionals evaluate and score potential properties under consideration before any property is put under contract. This robust process was followed in Lagos, as it is around the world.

Again, her media guidance could have noted that OBO's very extensive site selection process is spelled out in 15 FAM 470, which is a public source of information the Department makes available online. Hey, Matt Lee, read it for yourself instead of scoffing about how replacing our decrepit building in Lagos "can’t be that much of a priority if it’s taken five years." Is that Foreign Affairs Manual not written in English?

Fox concluded its story with John Bolton, a former U.S. Ambassador to the United Nations and Fox News contributor, finding this real estate transaction "very unusual."

“The impression left is that there’s favoritism involved,” Bolton said. “And it’s just very unusual in State Department real estate and housing transactions overseas to have this kind of focus on someone with such clear financial connections to even the departed secretary of state. Normally, there’s much more competitive activity involved, [of] which we haven’t seen any evidence from the State Department.”

Well Ambassador Bolton, did Fox News ask for such evidence? Maybe it ought to. I think OBO could provide it.

Just as an aside, let me note that our government’s domestic real estate transactions can also give an impression of political favoritism sometimes. Consider the sweet deal that the U.S. Postal Service concluded with a real estate firm headed by the husband of Senator Diane Feinstein.

CB Richard Ellis (CBRE), of which Sen. Feinstein’s husband is the Chairman and largest individual owner, brokers the sale of thousands of unwanted Post office properties and, by the terms of its contract, gets to represent and profit from both sides of those transactions, the seller and the buyer. Last year the Postal Service's OIG found:

Management continues to allow CBRE to collect commissions from lessors for lease negotiations in addition to payments from the Postal Service based on performance targets for lease renewals. Management also allows dual agency transactions, enabling CBRE to represent and negotiate for both the Postal Service and buyers or lessors. These actions are inherently risky and create conflicts of interest whereby CBRE may not negotiate property sales and lease transactions in the Postal Service’s best interest or may capture opposing party fees from the Postal Service.

Oh, sure, Feinstein’s husband is not the sole owner of CBRE, and the Postal Service contract is a drop in bucket for them, and it was a competitive bid, and so on. You can find exculpatory material here. Nevertheless, if that deal had happened in any foreign country, I’d automatically assume it was corrupt. When it happens here, maybe a softer term for it is crony capitalism.