WILL MAJOR CBI LITIGATION IN THE EAST CARIBBEAN SPEED THE REFORM OR DEMISE OF THE EUROPEAN UNION'S ONLY REMAINING ROGUE PASSPORT SALES JURISDICTION?

If you followed this week's events, you know that a groundbreaking federal Racketeering Influenced Corrupt Organization lawsuit was filed in the United States, asserting that the Citizenship by Investment (CBI/CIP) passport & citizenship sales schemes in both the Federation of St. Kitts & Nevis, and in St. Lucia, are illegally administered and operated, and that rampant bribes and kickbacks occur in those programs. The plaintiffs, who are seeking both actual and treble damages for their substantial losses, have demanded four hundred and fifty million dollars in their Prayer for Relief. If the verdicts handed down in prior RICO jury trials are any indication, and given the quality of evidence seen at this early stage, they may very well succeed.

 Many experienced legal observers of the economic passport sales industry believe that the lawsuit will compel the five East Caribbean States, who have been uncooperative to date even when presented with clear and convincing evidence of widespread corruption and illegal conduct, into instituting a number of comprehensive reforms forthwith, to enable their programs to survive. When legally and properly supervised, and periodically audited, CBI passport programs can provide a valuable service to legitimate applicants. If meaningful and complete reform is conducted, CBI programs lawfully run by the East Caribbean States would also provide substantial economic benefits to the citizens of the nations that offer them.

Within the Members of the European Union,  a similar situation exists in the sole remaining EU state that offers CBI products, the Republic of Malta. The European Commission, completely unhappy with the unlawful and corrupt manner in which Maltese leaders have allowed the program to operate, have initiated legal proceedings to terminate, with prejudice, Malta's CBI program, an action which could eventually result in the program's demise.

Now, with the raised public and international governmental awareness anticipated about CBIs ineffective due diligence, discounted pricing, and the granting of citizenship & passports to clearly ineligible, and even criminal elements, all highlighted by this major new lawsuit, Malta may soon find itself facing tough choices, if it truly wants to preserve its CBI program. it must either totally revamp how it is administered, including the use of professional career civil servants, rather than unqualified political appointees. It must also use internationally known external compliance teams to vet the applicants, and corruption must be eliminated, at all phases of the process. Only if this occurs, can the program survive.

As the American CBI case winds its way through the court system, with what we believe will be close monitoring from the European Commission, the pressure on Malta to reform its program, to save it from termination, will increase. Pressure from the passport sales industry should also be applied, if those companies desire to remain in business. Malta's CBI program is the master of its own fate, and we shall see whether senior officials in government there have the wisdom to bring sorely needed reform, so that the program survives.