|Montreal, March 20, 2004 / No 140|
by Ralph Maddocks
Leafing through a recent issue of The Economist I read several articles therein relating to corruption. Naturally there were usual suspects, Brazil, Thailand, Indonesia and, not to be left out on this occasion, Canada. It seems that wherever one looks these days, those in whom we confide our trust feel little compunction to betray it in order to benefit themselves or selected friends at our expense.
The European Union and the United States too are not without their participants
in this seeming globalization of corruption. Over the years there has been
a gradual but clear decline in the probity of elected politicians and perhaps
even worse, that of our public servants. Of course when one mentions corruption
in South American or Far Eastern countries, eyes roll upwards and knowing
smiles appear. The unspoken message being, What do you expect to happen
in such places? However, even though many may think such countries have
refined corruption to a fine art, we can find other examples in the so-called
western democracies, perhaps none better than France.
Almost a decade ago, in 1995, when Jacques Chirac was elected to the French presidency he seemed to be a relatively upright and decent person. At least when compared to his immediate predecessor, François Mitterand. It may be recalled that among Mr. Mitterand's better known activities was the contributing of millions of francs via Elf – the French oil multinational created by De Gaulle in 1963 – towards the re-election of his friend Helmut Kohl, the right-wing German Christian Democrat leader. It would be ungracious indeed to ask if the favourable deal for Elf to buy the former East German Leuna oil refinery had anything to do with the above. His fellow socialist, Édith Cresson, with her nepotistic ways plus some opportune whistleblowing, led to the mass resignation of the European Commission in 1999. This is the same Édith Cresson who was also caught up in the Elf scandal of the early 1990s, having been paid over three million francs by Elf. The Elf scandal which occurred during the second Mitterand presidency (1988-1995), saw Elf's senior managers stripping out over 305 million euros and in the resulting trial of the 37 officials accused in the affair, 30 were convicted.
Today, the impression of Mr. Chirac's integrity is being erased by public knowledge of a string of scandals which are alleged to have occurred during his tenancy as Mayor of Paris. Now it is true that Mr. Chirac has not been formally accused or tried and found guilty of anything. President Chirac himself currently enjoys immunity from prosecution as a result of the decision by a commission which he himself appointed in December 2000 to grant him that benefit. However, his sidekick, Alain Juppé, formerly financial director at the Mairie and secretary-general of the Rassemblement pour la République (RPR), which just happened to be Mr. Chirac's party, was given an 8-month suspended prison sentence in January. Mr. Juppé's offence, which he is appealing, was to have been found guilty of putting seven party workers on the municipal payroll between 1988 and 1995.
What seems to have happened is that the system formerly administered by Mitterand has become permanently corrupt. The situation is so bad that magistrates have needed police protection for years, and the judge who sentenced Mr. Juppé told one newspaper that her offices had been broken into and her telephone tapped. Some readers may shrug all this off, having become used to such things, and perhaps this is symptomatic of our times. The Front National, steered by Jean-Marie Le Pen, which offers itself as a clean alternative to the existing parties, may well surprise everyone if enough voters have become disgusted by the actions of the main parties. The forthcoming regional council and European Parliament elections could well show a move in Le Pen's direction. Especially if enough voters are sufficiently angered by the corruption so evidently championed by the present parties that they are prepared to ignore some of the less attractive ideas espoused by Mr. Le Pen.
The European Union, and in particular its Commission of unelected apparatchiks, is no model of virtue either and scandals exposed there have seemed to disappear into thin air as their perpetrators react only by hounding those who have had the honesty to reveal the corruption in the first place. Two examples of prominent EU whistleblowers come to mind, Paul van Buitenen and Marta Andreasen. Readers may recall that the former was an Assistant Auditor in the Financial Control Directorate of the EU Commission. In 1998, Mr. van Buitenen revealed to the European Parliament the extent of corruption within the Commission and the favouritism of Édith Cresson, resulting in the resignation of the entire Commission. Of course, things were not quite as simple as that statement may make it appear, Mr. van Buitenen was hounded, suspended, severely reprimanded and ultimately banned from auditing although he retained his employment. In the end, an inquiry by the so-called Committee of Experts agreed in essence with what he had reported. A new Commissioner in charge of reform was appointed, a recycled British politician whose inability to get his party elected to power was presumably considered an advantage, with the responsibility of reforming matters.
In May 2002, another whistleblower, Marta Andreasen, was dismissed from her post as Chief Accounting Officer after revealing that the Commission's accounting system is widely open to fraud. The above mentioned Commissioner, Neil Kinnock, has still not launched any official disciplinary procedures against her, presumably because to do so may prove that she was right all along. Plus ça change!
In January this year some of this became clearer when a leaked report painted a damning picture of Kinnock's three-years of effort to turn around the organisation's reputation for waste and corruption. The confidential review of the commission's financial practices found that it had failed to introduce proper controls over how taxpayers' money is spent, despite the series of damaging scandals. The failure to keep proper records, claims the report by the commission's watchdog, leaves the EU "vulnerable to irregularities and fraud." It added that Brussels officials still try to overstate how good their book-keeping is, creating "a serious reputational and credibility risk." Although critics have acknowledged that some little progress has been made, an estimated $11.25 billion of the EU's annual $158 billion budget still goes missing, much of it, apparently, in the form of falsely claimed agricultural subsidies. It should not come as a surprise that one of the stoutest defenders of agricultural subsidies just happens to be France.
The leaked report was prepared last year by the EU's Internal Audit Service (IAS), which was established in 2000. Completed in April 2003, the report says that despite improvements "the commission is inadequately equipped to fully meet its accounting responsibilities." It found that a lack of qualified staff, inadequate training and the absence of a proper computer system have led to an "immature" attitude to financial record keeping. It also asserted that financial reports are "incomplete and contain significant errors." In addition, the commission's accounting system fails to record adequately when payments are made. The IAS warned: "Non-recorded assets can bypass internal control and are thus more vulnerable to irregularities and fraud." The commission has set a deadline of next January 2005 to complete its reforms. A date which Marta Andreasen said had been picked deliberately, adding that, "They will try to leave the burden for the new commissioners, and they will take six to eight months even to find out what is going on."
Now we learn that Marta Andreasen has joined and will stand for election on the new list "Europa Transparant" in the Dutch European elections. The list was launched recently and is headed Paul van Buitenen. One hopes that the good people of the Netherlands will support and return them to the EU Parliament where they may help to achieve the reforms needed so urgently. If the system seems irredeemably corrupt, even those who are naturally honest and uncorrupted may hesitate to speak out. Democracy can only function if the majority of the electorate believes that a majority of those they elect are honest.
Perhaps encouraged by the example of Europe's Mitterand and Kohl, Arnoldo Aleman, the former Nicaraguan President and strong man of the country's right-wing Liberal Alliance, defrauded Nicaragua's public finances of tens of millions dollars during his six-year term of office. For his monumental larceny Mr. Aleman was sentenced to 20 years imprisonment for fraud in December 2003. Countries like Nicaragua, many of them unable to sustain basic services and facing intractable socio-economic problems, do not need corrupt presidents.
Since the war years of the 1980s, social and economic failure there has increased through the poorly conceived policies of the 1990s. That failure continues today, being accompanied by a serious moral failure shown in the endemic corruption that plagues Nicaragua and its neighbours. One might ponder how endemic corruption is affected by the "free-market" medicine prescribed by the International Monetary Fund and the World Bank. Perhaps a free market is taken to mean a market free for the plundering. Already in 2004, Nicaragua is having to reduce its inadequate education budget by over 10%. Certainly, corruption seems to have become an excuse for institutions such as the World Bank and others to explain away their own record of failure.
Whether Alemen serves his sentence or not, something which seems to be increasingly unlikely, his being behind bars may have little to do with his stealing of millions of dollars. One recalls Roosevelt's reported remark about a former corrupt dictator of Nicaragua, Anastasio Somoza: "He may be a son of a bitch – but he's our son of a bitch," is a phrase which has applied to many friends of the US over the years. The procession is now very familiar and includes such luminaries as the Shah of Iran, Noriega in Panama, Saddam Hussein, Ceausescu, Haiti's Duvaliers, President Marcos and Madam in the Philippines, Suharto in Indonesia and Mobutu in the Congo, to use just the short list. Aleman is another in the long line of creatures of the United States who became too clever by half and got out of control. His crime was most likely that he displeased the United States government because he negotiated power sharing deals with the Sandinista opposition party of Daniel Ortega.
The current spate of trials of US executives for real, and perhaps even some newly invented or imaginary, crimes of lying about unproven and unindicted insider trading charges, or stealing from shareholders and pension funds in order to make possible the maintenance of exotic lifestyles, is capturing the attention of many in the USA. However, it is hard to dismiss the thought that some of this may have a great deal more to do with diverting attention from perhaps more grievous crimes perpetrated by politicians with present and former business connections. We have seen the imposition of niggardly (for the politically correct, this means miserly) $1.5 billion US fines on Citigroup's Salomon Smith Barney, Credit Suisse First Boston, Merrill Lynch, Morgan Stanley, UBS Warburg, and Goldman Sachs, after an investigation into foreign exchange fraud by that shrinking violet, New York's Attorney General.
There is also much speculation about the massive corruption emerging in the growing Enron and Parmalat scandals, but it is doubtful if these two will ever equal the BCCI fraud. The BCCI (Bank of Credit and Commerce International) fraud, known to the CIA as early as 1985, is said to exceed those of Enron or Parmalat by several orders of magnitude, both in terms of money and political involvement. The Senate investigation of John Kerry and Hank Brown into the BCCI fiasco found that: "The professed lack of knowledge by the CIA about the activities of its foreign intelligence liaisons and operatives who were BCCI's major shareholders and customers is perplexing and disturbing." Perplexing perhaps, if one chooses not to believe that the Reagan/Bush White House was using the BCCI for its dubious covert arrangements such as the Iran-Contra affair, funding the Afghan mujahhedin and laundering drug money for both.
Compared to the above, the so-called Liberal communications company scandals in this country are pretty small beer. People are becoming apoplectic about a couple of hundred million dollars disappearing into the hands of the government's friends. True, it is all quite appalling and the perpetrators should be punished, but what about the monumental incompetence at the HRDC millions and the continuing gun registry fiasco? Are we to accept incompetence as being something we simply cannot help or do anything about? In a private business or limited company anyone who presided over financial incompetence on that scale would not hold office very long after the news became public.
What we seem to be witnessing in many of these emerging scandals is a diffusion of responsibility. Psychologists have noted that the more people witnessing a disturbing event the less responsible any one individual feels because responsibility is evenly distributed among the group. In other words, everyone assumes that all the others in the group or department know what is going on and believe that one of the others will blow the whistle, thus relieving them of that responsibility. The trouble is that things don't happen this way, whistleblowers tend to be punished, either openly or subtly. As the honest outspoken Canadian civil servant, Allan Cutler, wrote in his log in March of 1995, "Chuck (Guité his boss) frankly stated my chances of maintaining a government job would be slim under the present government situation. With the government cutbacks, I agree with him. I am obviously trapped." This was after he had written in that same log some days earlier "I have discovered that I am expected to cover up deals made and not use good procurement practices learned over 20 years..."
Let us hope that the quotation, which I believe comes from Montesquieu: "The law is like a web, big insects fly right through it, only the little ones get caught…" does not prove true.
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