/Kidnapping: A Very Efficient Business

Kidnapping: A Very Efficient Business

Independent News and Media/Getty ImagesJennifer Guinness, who had been kidnapped by the Provisional IRA, shortly after her rescue, Dublin, 1986

In Argentina in the early 1970s, leftist guerrillas started snatching executives of multinational companies and demanding ransoms. This culminated in the payment of $60 million to the Montoneros, a Peronist guerrilla group, for the release of the brothers Juan and Jorge Born, executives at the grain-exporting firm Bunge & Born and the sons of its president. The ransom seems noteworthy for its heft—at about $275 million in today’s money, it stands as the largest one paid in a conventional kidnapping case. (In 2017 Qatar reportedly paid $1 billion to an al-Qaeda affiliate and Iran to win the release of a royal hunting party.) But perhaps what makes the Born case more unusual in the history of the ransom trade is the fact that Jorge himself negotiated the price while captive. He had intimate knowledge of the company’s finances and thus had a precise sense of how much money could be raised—though not, crucially, how much ought to be paid. The deal he struck was delivered to Born père, who had refused the initial demand of $100 million, as a signed memorandum.

As Argentine ransoms soared, insurers at Lloyd’s of London were beginning to rake in premiums from a peculiar product. Kidnap-and-ransom (K&R) insurance had existed since 1932—it was developed in response to the abduction and killing of Charles Lindbergh’s twenty-month-old son—but it didn’t take off until the 1960s, following a series of kidnappings of businessmen and their families in Europe and Latin America. Companies started buying coverage for those employees most likely to be targeted, and the market boomed. Had Bunge & Born purchased coverage for the brothers, it would have been reimbursed for at least a portion of the payout.

But early K&R insurance had a notable flaw: insurers were not involved in the ransoming process. Families and employers were left to haggle with kidnappers, raise funds, and deliver payments; insurers simply paid them back. Of course, these distressed and inexperienced parties were “not in a position to strike the best deal,” writes Joel Simon in We Want to Negotiate: The Secret World of Kidnapping, Hostages, and Ransom, which includes a concise survey of the K&R industry. And parties who paid too much might be targeted again: in 1983 the wife of Teddy Wang, a Hong Kong property tycoon, paid $11 million for his return; in 1990 she paid $60 million—but that time he was not released, and his body was never found.

In the mid-1970s, Julian Radcliffe, a young insurance broker in London, helped fix this flaw. He came up with the idea for Control Risks, a security consultancy that, as part of the Lloyd’s K&R package, would advise policyholders on how to prevent kidnappings and assist if one occurred. Potential insured parties would be thoroughly vetted, and those who passed muster would be rewarded for the implementation of specific security measures (such as hiring guards or varying routes to work) with reduced premiums—a way of mitigating the classic problems of “adverse selection” (the tendency of those likely to experience a loss to seek coverage) and “moral hazard” (the lack of incentive to avoid risk where there is protection against its consequences).

In the event of a kidnapping, consultants—mostly former military and law enforcement—would advise relatives or employers on the negotiations. Someone from the hostage’s family or company would be appointed to do the talking; otherwise, the kidnappers might realize they had an insured hostage and increase their demands. Once a price was agreed upon, specialists would deliver the ransom and retrieve the hostages. This quickly became the new way of doing things.

In 1977 Mike Ackerman, a former CIA agent, started the first American K&R consultancy, which differed from Control Risks in that Ackerman did everything himself. In most cases, he was the one on the phone with the kidnappers, sometimes posing as a member of the family or an employee of the company (he was fluent in Spanish); and it was he, not a middleman, who went about dropping bags of cash from a helicopter over the jungle.

The K&R business has been imagined to involve high drama and heroism. A 1998 Vanity Fair article described it as “a world in which Cold War exiles—a roguish business of small companies and locked doors and names such as Control Risks—will send ex-spooks, special forces, or Scotland Yard men anywhere on earth, on a moment’s notice, to bail you out when the kidnappers are demanding millions.” Hollywood for a time was keen on K&R. In the 2000 film Proof of Life, Terry Thorne, a former SAS officer (played by Russell Crowe at peak brawn), is dispatched to “Tecala,” a fictional South American country, to negotiate with a rebel group for the release of an American petroleum engineer. It’s soon discovered that the engineer’s employer failed to renew its K&R policy, and Thorne is summoned back to London. But he returns and offers his services pro bono, lest the engineer’s beautiful wife (Meg Ryan) receive inferior assistance from some compromised local go-between. Thorne wrestles the ransom down from $6 million to $650,000, but the negotiation falls through for other reasons, so Thorne teams up with another kidnap specialist whose client, an insured Italian businessman, is being held in the same rebel camp. Together they raid the mountain stronghold and extract the hostages.

Naturally, an action movie can’t end with an orderly commercial resolution, though that’s exactly how the case that inspired Proof of Life did: Thomas Hargrove, a scientist captured by the Revolutionary Armed Forces of Colombia (FARC) in 1994 and held for eleven months, was released after his family, without the assistance of a negotiator, made two payments totaling $250,000. Around 90 percent of all kidnappings are successfully resolved, meaning the hostages return alive, usually through ransom—an “astonishing success rate,” remarks Anja Shortland in Kidnap: Inside the Ransom Business. And the odds are considerably better if specialists are involved: more than 97 percent of cases handled by professional negotiators are resolved successfully, almost always through ransom. (A small percentage of hostages escape and an even smaller number are rescued.) In almost all of these cases, the negotiators are provided as part of an insurance package, but if a victim is uninsured, they can be hired directly (the good ones for over $2,000 a day).

“How can such a difficult market operate so successfully?,” Shortland asks. As she might have done more to emphasize, K&R insurance is for the wealthy or well-connected international and national elite: rich local families, employees of major corporations, staff journalists, and NGO workers. But worldwide, most victims are kidnapped in their own countries, and few will be covered. Foreigners are an extreme minority of kidnap victims, between 2 and 6 percent, depending on the region.

Accordingly, insured payouts constitute a small percentage of the roughly $500 million to $1.5 billion collected in ransoms each year, but Shortland argues that the growing use of insurance has made kidnapping both safer and more affordable for all victims. This is because the industry’s professionals practice what Shortland calls “ransom discipline”: they know the going rates in local markets and help their clients pay no more than is necessary, which stabilizes the market overall. Simon notes that “negotiators can now predict with a good degree of accuracy how long a case will take to resolve and how much ransom will be paid based on the location of the incident and the nationality of the victim.” With its record of success, the industry is flourishing. More than 75 percent of Fortune 500 companies have K&R policies, and premiums are worth $250 to $300 million a year.

It’s striking that both Shortland, an economist at King’s College London and an expert on Somali piracy who examines the kidnapping market through a “rational choice framework” (and admits to having been reminded by one source that “people die, Anja!”), and Simon, who as the executive director of the Committee to Protect Journalists is concerned above all with safety, believe that the industry is a net positive. Critics have long worried that, as Simon puts it, the “tendency to look for monetary settlements fuels global kidnapping.” By facilitating ransom payments, this logic goes, insurance helps make kidnapping profitable and thereby encourages further crime. And the insured are particularly vulnerable, as kidnappers might target people suspected of having coverage.

Such arguments first gained traction in 1986, when Jennifer Guinness, the wife of John Guinness, a banker and member of the brewing family, was kidnapped by the Provisional IRA, which demanded $2.6 million. She was rescued by the Gardaí days later, but a K&R policy had been triggered and Control Risks retained to negotiate. Authorities reported that the kidnappers expected that the money “would come from an insurance policy.” Public outrage led one English MP to call for the prosecution of Control Risks and its underwriter for violating prevention-of-terrorism laws. Parliament passed a motion expressing concern, and there was talk of a Europe-wide ban on K&R coverage.

The industry defended itself on various grounds in a trade publication. It was rare for the insured to be kidnapped at all. Policies were conditional on absolute secrecy (if the buyer was an employer, insured employees were forbidden from being told they were covered), so victims were being taken hostage not because they were known to have insurance but because they were known to be rich or prominent. Policy requirements led to heightened safety, which by definition lowered risks. Moreover, insurance did not drive up ransoms, as the policies only provided reimbursement and were written for less than the policyholder’s net worth. The K&R industry was not only not fueling kidnapping, its advocates maintained, it was serving the greater good: the availability of coverage enabled international companies to operate in dangerous environments while fulfilling their “duty of care” toward their employees.

Eventually, it was determined that Control Risks and its underwriter had broken no laws, and the outrage faded. In other parts of Europe and in Latin America, however, laws designed to inhibit the hostage trade were enacted. Italy had been an abduction hotspot since the late 1960s—John Paul Getty III was kidnapped in Rome in 1973—and in 1991 the government criminalized the sale of K&R insurance and the negotiation and payment of ransom, and made it possible to preemptively freeze assets of the victim’s family or employer. Victims stopped reporting incidents to the authorities and arranged to pay ransoms outside the country. Inspired by Italy, Colombia introduced anti-kidnapping legislation in 1993, and there too negotiations went underground.

Despite such obstacles, as Ann Hagedorn Auerbach wrote in her 1998 book Ransom: The Untold Story of International Kidnapping, the “chaos and opportunity flowing out of the Cold War thaw, along with the anxiety over national security that the Gulf War had precipitated,” created an unprecedented demand for protection and crisis-resolution services, and new providers cropped up in the UK and US. Indeed, groups engaged in kidnapping had gotten both bolder and more sophisticated. In Colombia in the 1990s, the FARC collected detailed financial data on the firms operating locally and maintained a database of potential targets, which they would check on laptops as they evaluated parties at roadblocks. Even the US, which, owing largely to the efficacy of law enforcement, has historically had a low kidnapping rate, saw a surge in robbery-style incidents during this time. There were “doorbell abductions,” in which the family of a banker would be held at home while the banker was taken to the bank to get money (the model for the 2001 film Bandits). In Silicon Valley, executives of tech companies were ambushed on the way home from work and forced at gunpoint back to the office to hand over valuable computer components.

Kingsport Times NewsA newspaper clipping showing Muriel ‘Tinko’ Pawley after she was released by her Chinese kidnappers, Manchuria, 1932

As these changes and innovations suggest, kidnapping for ransom (usually money but occasionally goods—according to Auerbach, an American businessman was once exchanged for two basketballs and two teams’ worth of uniforms) is almost always a deliberative enterprise. “Kidnappers make rational choices,” Shortland writes. Like the professionals on the other side, kidnappers perform research, assess risks, manage costs, and, if they’re in it for the long term, build reputations for orderly resolution. Some groups even develop an infrastructure to support their operations, though this is expensive and may increase the number of expectant beneficiaries (if operations are mounted on credit, for example).

When kidnappers keep hostages for days, weeks, or months, most invest in keeping them alive (a corpse is not worth much, except in the Iliad) and in decent health. Captives with medical conditions are usually allowed to receive medications; in 2010 al-Qaeda let a French woman with breast cancer take chemo drugs. Somali pirates are governed by a strict code of conduct that fines guards for hurting hostages; there’s even a printed “Pirate’s Handbook.” They have been known to send their counterparties receipts for items, such as bottled water, procured for the proper maintenance of the captives. Criminal groups want to be seen as trustworthy adversaries bargaining in good faith—if the ransom is paid, the hostage is released—and know that killing or harming hostages will imperil negotiations and, in some cases, lead to armed intervention.

Even though kidnappers are rational actors (in theory, at least) and outcomes are generally predictable, “there are no shortcuts” to resolution, Shortland observes. “Why don’t we just pay them a million?” the director of an oil firm asked a crisis responder. “We spill more than that in a day.” As with any transaction that involves haggling, there’s an unavoidable theatricality and ceremony to the process, and professional negotiators are accustomed to this—“There is a pace, a rhythm to these things,” one consultant told Shortland. If the initial demand is $1 million, and recent cases in the area have been settled for around $10,000 in around five days, then “an initial offer of $5,000 might be a good start” and “more money will be ‘found’—though in decreasing increments,” petering out around $10,000. But if precedents are around $100,000, “a paltry initial offer of $5,000 could be perceived as an insult and put the hostage’s life at risk.”

With their second and third rounds of offers, negotiators on both sides signal the “curve” and likely convergence point, which in most cases, according to Simon, will be between 5 and 10 percent of the opening ask. And although kidnappers tend to release hostages when they believe that the cost of holding out exceeds the benefit, they will sometimes test this with silence, threats, or abuse—this is called “wringing the towel dry.” Families have to dissemble, claiming there’s simply nothing left. If an ear or finger arrives in the mail, it’s worth doing a DNA test.

The course of a negotiation can also be affected by external factors, such as media exposure. Shortland recounts the 2011 abduction by Somali pirates of the crew of the Danish-owned merchant ship Leopard. The pirates demanded $10 million for the crew, and the company that owned the ship claimed it was on the brink of bankruptcy. The pirates went down to $6 million. But then a Danish tabloid and TV channel revealed that the shipowner was a multimillionaire who was living large while his crew suffered. The pirates immediately increased their demand to $15 million, and as public anger in Denmark grew against the “callous” owner, the pirates leaped to $35 million. The case was finally resolved, after 839 days, for $6.9 million, raised from several sources. The hostages sued the media outlets for worsening their ordeal. And Somali pirates’ appetites were whetted.

But the biggest risk to the stability of the hostage trade, in both Shortland’s and Simon’s accounts, is the apparently well-meaning terrorism policies of sovereign governments. “The terror attacks” of September 11, writes Simon, “and the wave of high profile kidnappings carried out by Al Qaeda-aligned groups, spawned a coordinated, global effort to deprive terror groups of financing.” Governments now “sought to draw a clearer distinction between criminal groups, to whom ransom could legally be paid, and terror groups, to whom it could not.” The UN forbids the transfer of money to designated terrorist groups; the US Treasury, the EU, and other governmental bodies also maintain such lists. Private persons and entities cannot legally make concessions to proscribed groups, and if they do, their insurers cannot legally reimburse them, though ransom-payers are rarely if ever prosecuted.

“If it’s criminal, it’s legal,” a British bureaucrat told Shortland of ransom payments. But it’s not always clear which category kidnappers fit into. Some terrorists pretend to be part of criminal organizations so that they can legally collect ransoms. Shortland reports that when a Somali told British negotiators that he represented the “commercial arm” of al-Shabaab, the jihadist fundamentalist group, “they had to explain that this was not sufficiently removed from the parent organization to have a payment authorized.” Some criminals, apparently ignorant of the rules, pretend to be terrorists in order to intimidate their counterparties. Negotiators may take care to avoid learning whether the hostage-takers are proscribed. Jere van Dyk, an American journalist who was kidnapped in 2008 in a Pashtun tribal area on the Afghanistan–Pakistan border, was told by a specialist in the region that his captors were part of a criminal group who put on an elaborate, protracted act, pretending to be the Taliban for Van Dyk’s sole benefit. With this somewhat strained deniability, Shortland notes, “his employers could pursue a private resolution through their insurance company.”

Governments sometimes do make concessions to terrorists, further complicating matters. It is an open secret that, in defiance of the UN ransom ban, European and Asian states have paid to free journalists, aid workers, and others. When states negotiate, they will almost certainly overpay: even a wealthy family can plausibly plead financial limits, but Spain cannot claim to have little cash on hand. This kind of inflation inevitably spreads to the criminal market, in which governments rarely intervene. “If a European government pays millions of dollars in ransom to release a hostage held by a terrorist group,” Simon writes, “then a criminal group that kidnaps a hapless tourist will expect a similar payout from a family of modest means that may not have insurance or the help of a security consultant.” In Shortland’s view, the main threat to the stability of the hostage trade is a lack of ransom discipline, and governments are among the worst offenders.

The private sector has indeed developed an effective regime for governing the international criminal kidnapping market. The network of insurers and crisis responders is a small, tight-knit community whose members share information freely yet discreetly (the underwriters in the Lloyd’s syndicates sit feet from one another in an office on Lime Street), subscribe to common protocols, reward top performance, and shun those who mess up. (Civil servants, unlike private negotiators, are not likely to lose their jobs if they fail to contain costs.) Shortland believes that this private governance regime is “the best (if not the only) way of ordering this difficult market.”

But even though K&R premiums have fallen by half in the past decade, not everyone who could benefit from coverage has it, and not every family can afford à la carte services. Freelance journalists and volunteer aid workers are particularly vulnerable. Shortland suggests in passing that security firms ought to increase their pro bono work; Simon goes further, proposing that governments work with the industry “to develop innovative ways to extend coverage to vulnerable groups,” and that families lacking insurance be given access to consultants in extraordinary circumstances, whether through pro bono services or through a government subsidy.

These are sensible proposals. But any analysis of the K&R business is limited to a small fraction of all kidnapping incidents. Even if the effects of this system are felt more widely, they are felt most directly among those who are similar to insured parties. Most victims continue to be low-risk, low-value locals. Shortland observes that in areas with informal protectors, such as entrenched rebel and mafia groups, kidnapping has most commonly been used to “tax” families and companies who fail to make appropriate protection payments. But kidnap practices—both who does it and how—are changing. The one-off model of hostage-taking, long used with foreigners and wealthy nationals, is increasingly seen in local kidnappings unrelated to protection—though this is still essentially self-regulating in its efficiency and modest goals.

In Mexico, kidnappers used to target the ultrarich, but many have shifted focus to the middle class. The trade has been “democratized,” a Mexican crisis responder told The Economist. Social media have created a new way to shop for victims who are not tabloid princesses and scions of industrial families but who look flush and might be handily location-tagged on Instagram or lured on Tinder. Kidnappers who lack resources or skills, or who simply want to make a quick buck, may avoid the challenges of hostage-keeping altogether. In countries such as Brazil, Ecuador, and Tanzania, the norm has become the “express” kidnapping: victims are taken to an ATM, forced to withdraw the daily maximum (twice, if the detention straddles midnight), and released. Some kidnappers don’t even bother with the kidnapping. In a “virtual” or “phantom” case, the criminals send a ransom demand while the unwitting “hostage” is in the cinema or on a hike (and thus cannot be contacted), or else they call and threaten the victim, telling him not to talk to anyone for a given period of time, during which they extort his family.

The history of modern kidnapping-for-ransom is dominated by cases involving high-profile victims; those of lesser standing are always likely to be overlooked. In 1932, the same year the Lindbergh baby was abducted, a nineteen-year-old, well-to-do English woman named Muriel “Tinko” Pawley was taken hostage, along with her three dogs, by bandits in northern China. Tinko had grown up mostly in China and married an Englishman who worked for the Asiatic Petroleum Company. The kidnappers demanded a huge sum of money and sundry supplies, and threatened that failure to comply would result in Tinko’s ears being cut off and her dogs killed.

This bizarre case—Tinko wrote to friends requesting lipstick and threatened the gang leader, in fluent Chinese, with both personal haunting and the transformation of his ancestors into turtles if she were killed, and was finally released in exchange for gold, opium, and some stylish brogues—was a sensation in the British press. Evelyn Waugh even wrote a short story based on it. But Tinko’s case was part of a vastly larger trend that affected many Westerners of modest means. In the preceding ten years, missionary families, salesmen, carriages of train passengers, and entire steamships had been captured, and those whose families were slow in paying did have their ears sliced off. When one of those trains was held up in Lincheng in 1923, two dozen foreigners were captured, and their safety became an international concern. Also captured were three hundred Chinese, whose fates were ignored by the press.

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