Freezer Burn:

SWITZERLAND HAS DISCOVERED THAWING ASSETS IS TOUGHER THAN FREEZING

CULLY, SWITZERLAND -- Freezing assets here is easy. All it takes is a
banker's suspicion of a client's ill-gotten gain and a quick call to
the federal money-laundering office, and it's done.

Thawing out assets, though, can be an entirely different story.
Consider the tale behind the Nixon-family portrait on the desk of
Jean-Pierre Allaz in this small wine village on the shores of Lake
Geneva.

"To His Excellency General Mobutu," begins the good-luck message
scribbled across the photo. It is signed by Richard Nixon, framed in
marble and topped with the U.S. presidential seal.

Nixon's Staying Power

This memento was no gift, for Mr. Allaz never knew the Nixons or the
late Zaire President Mobutu Sese Seko. Rather, it fell into his hands
when the Swiss government froze Mr. Mobutu's assets in Switzerland in
1997, as he was being booted from power. Mr. Allaz happens to be the
local bankruptcy-claims official in the region where Mr. Mobutu had a
grand villa. The residence contained an eclectic mix of furniture, 300
bottles of wine and a key to the city of San Francisco. Mr. Allaz was
entrusted with all of it.

"We were thinking one, maybe two years, that we would have it. But not
four years!" he says. Last month, Mr. Allaz was finally able to
auction off the villa for about $2 million. In June, he had sold most
of the contents, except for some personal items such as the Nixon
portrait. But the proceeds, along with $4 million in cash previously
seized, are still frozen. "We're waiting," he says, "for the [Swiss]
federal government to tell us what to do next."

The federal government, meanwhile, is waiting to hear from the
Democratic Republic of Congo, as Zaire is now called, that the money
was indeed illegally spirited out of the country. The Congo government
is wondering how it is going to prove that.

Dictator's Money

"In a dictatorship, the government treasury is mixed with the pocket
of the dictator," says Therese Nseka-Koko Diakanua, a diplomat at the
Congo embassy in Bern. "When the dictator takes money from his bank,
he just takes the money."

But without evidence that a judicial inquiry is underway in Congo,
Switzerland won't release the assets. "It looks so simple, but it
isn't," says Jacques de Watteville, head of financial and economic
affairs in the Swiss foreign ministry. Since the Sept. 11 terrorism
attacks, many officials in the U.S. have been clamoring about
freezing. Few have dwelled on unfreezing. Lists of individuals and
institutions suspected of involvement in terrorism have been sent
around the globe by the White House and the United Nations, and tens
of millions of dollars in hundreds of accounts have been frozen or are
under investigation.

"Right now, the focus has been on freezing the assets and getting the
money out of the terrorists' hands," says a U.S. Treasury official.

But then what? Will frozen terrorist money go to victims of the terror
attacks? Will it help to rebuild the World Trade Center? Will frozen
Taliban money go to the Northern Alliance or some future government of
Afghanistan? What about the Afghan people?

To seek some answers to these questions and others about repatriating
frozen assets in general, diplomats and finance officials from the
world's major financial centers are meeting Wednesday and Thursday in
Lausanne, just a few miles from the Mobutu mansion. "One of the
questions [the world] will have to face is, 'Fine, we've frozen, but
now what are we going to do with it?" says Kurt Hoechner, the diplomat
leading the Swiss delegation at the conference.

That question comes up frequently in Switzerland. Trying to live down
its history as a haven for the secret bank accounts of the world's bad
guys, the Swiss have enacted stringent laws against money laundering
in recent years. During the past decade, they have frozen more than $1
billion in ill-gotten accounts of potentates and crooks. "We hope this
gives us the opportunity to clearly show that anyone who is corrupt
and puts money in Switzerland is at risk of being frozen," says
Nicolas Michel, the foreign ministry's director of international law.

Freezing assets also has become a more common practice around the
world, including in the U.S., as a weapon against drug-running,
terrorism, repression and corruption. In the case of drug money,
Switzerland and other countries have a financial incentive to freeze,
since under standard international practice, they generally can keep a
cut of the money that has been forfeited in legal proceedings.

In some nondrug cases, countries seeking the return of frozen assets
have proven the illegal nature of the funds to the Swiss judicial
system. Thus, in recent years, Switzerland has returned $4.5 million
to Argentina from a bribery case and, after a six-year process, $2.5
million to Mali from the frozen accounts of former political leaders.

But as the Mali case illustrates, money claimed by poor nations or
suffering victims can languish for years because of the difficulty in
sorting out who should get it. In 1986, the Swiss froze about $300
million from accounts associated with late Philippine ruler Ferdinand
Marcos and his cronies. Fifteen years later, the money -- which has
more than doubled with interest -- is still frozen. The Swiss banks
continue to take their conventional fees for tending such assets, but
the government doesn't keep a share when politically tainted money is
returned.

With little precedent to guide them, the Swiss are probing novel
approaches to get rid of political money more quickly. In 1999,
Switzerland froze more than $650 million from the accounts of former
Nigerian leader Sani Abacha and people in his circle. The bulk of this
money was blocked at Nigeria's request, and it will remain frozen
until the Nigerians complete a judicial review of charges that it was
embezzled. Some $60 million was blocked by Swiss banks acting on their
own under Switzerland's money-laundering law, which obliges bankers to
freeze assets if they have a serious suspicion about a client's
possible felonious activity.

Because it was blocked at Swiss initiative, the country had more say
over its dispensation. After negotiations with Nigerian officials,
prosecutors in Geneva came up with the idea of funneling this money
through the Bank for International Settlements in Basel to pay down
Nigeria's debt to various nations. Beyond this case, Swiss authorities
are pondering other ways to repatriate money to poor nations, such as
sending funds through an international-development agency that would
assure money is spent on projects benefiting the citizens of a country.

"Morally, we can't give money back to a country if we know it will
just go into another pocket, from one corruption case to another,"
says Mr. de Watteville. But even when governments claiming frozen
money are democratically elected and have signed U.N. human-rights
pacts, the restitution process can be tortuous.

Exhibit A is the Swiss Marcos money. Weeks after the two-decade Marcos
regime was toppled in 1986, the new Philippine government requested
assistance from Switzerland in tracking down the money. The Swiss
banks found hundreds of millions and froze it. "We blocked the money,
and then nothing happened," says Mr. Hoechner, a former Swiss
ambassador to the Philippines.

The money had been salted away in the accounts of various foundations,
leaving a complicated paper trail. "The banks here had the documents,
they were all in German and it was hard to find them," says Rora
Navarro-Tolentino, the current Philippine ambassador to Switzerland.
"There were different banks, big and small. And different cantons. We
had three lawyers working in each section of Switzerland." In the
Philippines, the process was slowed by claims from the Marcos family
and political haggling.

In the mid-1990s, the Swiss courts began moving money, albeit still
frozen, to a Philippine bank. A Swiss federal court said the eventual
disposition of the money should benefit victims of Marcos human-rights
violations. A Philippine law stipulates, however, that recovered
Marcos money should go to agrarian reform. Philippine lawmakers are
now considering legislation to square the two goals.

For the moment, about $25 million remains frozen in Switzerland.
Nearly $650 million, fattened by years of interest, is frozen in the
Philippines -- "though maybe as we are conversing, it is higher,"
laughs Ambassador Navarro-Tolentino. "Court processes are always long."

In a breezy office in Zurich, another case is just beginning. Cornelia
Cova, an examining magistrate, displays what looks like an intricate
diagram of a spider's web. Green, pink, yellow, orange and violet
lines connect at least 20 banks in Switzerland, Luxembourg, the U.S.,
Russia and Peru. It is a flow chart of money from the network of
Vladimiro Montesinos, Peru's former spy chief, now awaiting trial in
that country on corruption charges.

Last year, Swiss banks froze about $114 million from this web,
beginning with a bank in Zurich that acted based only on media reports
linking Mr. Montesinos to suspicious activity. Ms. Cova then began
tracing the money's sources, with the ultimate goal of sending it
back. Her message to Peruvian officials, who are aware of the
Marcos-money saga: "If you want the money back, you have to prove that
Montesinos was a corrupt guy."

In poor countries, a former ruler's millions can make a difference.
Mr. Mobutu's frozen money "is not enough to build up a country and
help everyone who is suffering, but it's a little drop that helps,"
says Fidele Sambassi, another diplomat at the Congo embassy in Bern.

The Swiss are waiting for a Congo trial to sort out the Mobutu
regime's activities. Congo diplomats say a trial could hinder attempts
in their country to foster reconciliation after a long and brutal bush
war. Besides, they note, the government that overthrew Mr. Mobutu
declared that all Mobutu money should be sent back to the country.

But a subsequent leader's fiat isn't enough to repatriate Swiss funds.
"For the moment, we have no indication that a judicial case is going
on" in Congo, says Mr. de Watteville. At the same time, various
members of the Mobutu clan are claiming parts of the fortune, as are
several creditors.

There is one person who would like the freeze of Mobutu money to
continue: a former Mobutu bodyguard who has kept vigil over the empty
mansion all these years. He has told Swiss officials he fears that if
he is sent back, with the money and the Nixon portrait, he will lose
his head.