The Corruption Blog

The Anatomy of Corruption in Public Procurement

2012-01-18T07:11:00.000-08:00

Public procurement presents significant risk under the U.S. Foreign Corrupt Practices Act (FCPA). Cases like Siemens Argentina, Siemens Venezuela, Johnson & Johnson, and Tenaris highlight the risk. Large amounts of money are at stake when the government procures things like roads, computer systems, oil extraction services, medical equipment, power stations, and textbooks. Companies must interact directly with government officials. And government officials have pockets of discretion that can give rise to manipulation of the process. When corruption is involved, procurement decisions are no longer based on price, experience, and quality.

I investigated corruption and fraud for The World Bank for several years in multiple countries known for high corruption risk. Almost every one of these investigations involved an expensive public procurement that The World Bank was financing in whole or in part. This financing is what gave The World Bank the jurisdiction to investigate and proceed against companies and businesspeople that we had found to have engaged in wrongdoing.
Public Procurement is Common
Government procurement is more common than one might think. It has been estimated to account for 14 to 20 percent of a country’s GDP, which would be between $8.16 trillion and $11.65 trillion worldwide each year. In Mexico, for example, the federal government spent about $53 billion in 2008 on public procurements, constituting about 18.4 percent of Mexico’s GDP. In 2009, it spent about $78 billion.
Common Corruption Schemes in Public Procurement
Through my experiences in private practice and at The World Bank, I have seen several common corruption schemes in public procurements. Internal compliance officers should be especially vigilant when their companies engage in this area of work. Here are some common issues to watch for.

Sometimes procurement officials require that bidders hire “consultants” as a way to funnel money back to the officials. This formed the basis of one Baker Hughes action and several of the Siemens actions.
Sometimes companies will disguise direct payments to procurement officials as something else. In the Johnson & Johnson case, the company funneled money to procurement authorities at state-owned hospitals by using sales agents to award “civil contracts” to doctors, purportedly to conduct trainings for the company that never actually happened.
Sometimes companies hire “experts” that, with or without the company’s knowledge, previously worked for the procurement agency itself. These individuals still have contacts in the procurement offices. Maybe they even designed the actual specifications of the tender at issue. As former officials, they know how to game the system.
Sometimes improper payments, if made during the project design phase, will influence procurement authorities to narrowly design a project’s specifications to benefit the company making the payments.
Sometimes project designers proactively seek to include complicated technical features in the tender. The more technical, the more room an official has to use discretion in the selection process to favor one bidder over another.
Sometimes companies gain access to confidential information, such as getting to see the tender specifications before they are officially released. In the Tenaris case, the company obtained access to competitors’ confidential bid information and then revised its own bids accordingly to win.
Sometimes procurement officials might choose to fully vet the bid of one company while giving a less rigorous review to the bid of another. In this way, companies that are unable to show appropriate qualifications and experience or the ability to deliver the appropriate product are still able to win the contract.
Sometimes companies will learn early on that a government is considering the procurement of goods and will then seek to “entertain” procurement officials before the tender process even begins. During these periods, actors are able to develop complicated schemes to transfer improper payments and direct contracts in return.
The World Bank does a good job in its publication, “The Most Common Red Flags of Fraud and Corruption in Procurement,” of highlighting other red flag in procurement. For example, when a procurement authority does not select a lowest bidder, repeatedly awards contracts to the same bidder, or changes the contract terms and values after the process concludes, investigators know to take a closer look.

High Alert Needed
Compliance officers should be on high alert when dealing with procurements. The above themes can help in structuring their own compliance measures to respond to risk.
In addition to being mindful of these corruption schemes, companies should also be mindful of the books and records and internal controls violations that can be associated with them. They should put mechanisms in place to ensure that management authorizes any use of agents, third parties are fully vetted and trained, transactions are accurately recorded in the books, backup documentation is maintained to justify expenses, and justification is maintained for the amount of fees paid to agents.
Companies should also make sure they know and follow the rules of public procurements. Almost every country has in place detailed rules that govern this activity. The World Bank requires countries to follow Procurement Guidelines for projects it finances. Companies should understand when they can and cannot interact directly with officials. They should know when it is appropriate to revise or clarify their bids. They should know and comply with timelines for submitting their bids, submitting clarification questions, and expecting procurement decisions.

@2012 Matteson Ellis Law, PLLC

Author: Matt Ellis

Another BRIC in the Anti-Corruption Wall (Brazil considers foreign bribery law overhaul)

2012-01-13T07:46:00.000-08:00

The Brazilian Congress is now considering Draft Bill 6.826/2010 that would dramatically strengthen its foreign bribery law. This is a significant development – the result of years of effort by Brazilian authorities working closely with their OECD, United States, and other counterparts. It is also timely. Sophisticated Brazilian-based multinationals are quickly expanding internationally, and encountering corruption risk. At the same time, Brazil is grappling with corruption on the domestic front: the President’s administration has lost six Ministers to corruption allegations since June 2011, and the country consistently ranks high on corruption risk indices.
Brazil’s effort is part of a broader movement. Countries that have adopted the OECD Anti-Bribery Convention, the United Nations Convention Against Corruption and other treaties are working to strengthen their anti-corruption laws. The FCPA Professor summarized Turkey’s recent progress in an earlier post. The Brazilian bill should improve its treaty implementation status with the OECD. (Brazil’s gaps were highlighted in the OECD’s Country Monitoring Reports for Brazil.) Moreover, as a significant effort by a major economy and regional leader, this bill may have impact outside of Brazil.
These provisions constitute dramatic changes in the Brazilian legal system. According to Carlos Henrique da Silva Ayres, one of the attorneys heading the Anti-Corruption and Compliance Committee of the Brazilian Institute for Business Law (Ibrademp):

The new law still requires some adjustments; however, it should be more easily applied than current laws. It introduces features that are relatively new or non-existent in the Brazilian anti-corruption arena, such as the credits corporations will get for compliance programs, self-disclosure and cooperation with authorities.

Key Provisions in Brazil’s Draft Legislation
In addition to penalizing domestic bribery, Brazil’s draft bill prohibits bribery of foreign public officials, defining the act in a way that appears consistent with the OECD Anti-Bribery Convention. Some provisions are particularly relevant:
Corporate Liability. The draft bill establishes the direct civil liability of corporations (also known as “legal persons”) for bribery of foreign public officials. It also makes corporations liable for the acts of their directors, officers, employees and agents under the theory of respondeat superior. These are dramatic developments in a country where the notion of corporate liability has received only limited recognition.
These changes bring Brazilian law closer to the U.S. Foreign Corrupt Practices Act (FCPA). Why not extend criminal liability to corporations, like the FCPA does? The answer is reflected in Brazil’s civil law system. Unlike common law jurisdictions, civil law systems generally do not apply criminal liability to legal persons. Civil law typically considers corporations to be abstract, intangible entities that have no capacity for the mens rea (intent) required to establish criminal conduct.
The OECD Antibribery Convention recognizes this variation in legal systems and compensates for it. Article 3(2) provides:

In the event that, under the legal system of a Party, criminal responsibility is not applicable to legal persons, that Party shall ensure that legal persons shall be subject to effective, proportionate and dissuasive non-criminal sanctions, including monetary sanctions, for bribery of foreign public officials.

Tightened Sanctions. The draft bill would establish harsh consequences for bribery of foreign officials. Fines would range between 1% and 30% of the company’s gross revenue. In addition, the bill would make prosecutions public, potentially creating reputational risk. Companies can be debarred from public contracts based on bribery violations.
These steep penalties appear responsive to the requirement of sanctions that are “effective, proportionate and dissuasive.” If the legislation is enacted, it will be important to watch how Brazilian courts apply these sanctions. The OECD Working Group on application of the convention is certain to review that question (see a previous review here).
Voluntary Disclosure, Cooperation, and Compliance Programs. The draft bill provides that the government should take into account voluntary disclosure, cooperation with government investigations, the existence of pre-existing and effective compliance programs, and other factors when determining sanctions. Specifically, Article 9 states:

The following will be taken into consideration at the application of the sanction:
I. the seriousness of the offense;
II. the advantage obtained or sought;
III. the accomplishment or non-accomplishment of the offense;
IV. the extension of the breach or the danger of injury;
V. the negative result caused by the injury;
VI. the economic status of the company;
VII. the cooperation in investigating the facts, through practices such as reporting violations to public authorities before a legal proceeding is initiated and the promptness in providing information in the course of investigations; and
VIII. the existence of internal integrity mechanisms and procedures, audits, and incentives to report violations, as well as the effective application of codes of ethics and conduct within the company.

This also makes the Brazilian approach similar to that of the FCPA. In fact, many of the provisions in the Brazilian bill appear to be directly lifted from the U.S. Department of Justice’s McNulty Memorandum and Chapter 8 (Sentencing of Organizations) of the 2010 United States Federal Sentencing Guidelines. But the bill goes further than the FCPA by incorporating considerations of such factors into the law. Under the FCPA, such factors make up enforcement policy and practice.
The difference, again, flows from Brazil’s civil law system. As a general principle of law, prosecutors and public authorities do not have discretion to seek specific sanctions. Rather, sanctions must be determined in accordance with a written law. Invoking a memorandum on enforcement practice would have little, if any, effect before a Brazilian court. In order to have any relevance, considerations like cooperation and compliance must be written into the law.
Mr. Ayres, along with Bruno Carneiro Maeda (also of Ibrademp), have testified before the Brazilian Congress about the draft legislation. They point out some lingering questions related to Article 9. They seek clarification on whether companies will get credit for their cooperation after proceedings have already begun. They are also concerned that the draft bill does not describe the elements of a credit-worthy compliance program.
Foreign Official. The Brazilian draft bill defines “Foreign Public Administration” and “Foreign Public Official” in a way that is consistent with the OECD and United Nations Conventions. Specifically, Article 6 provides:

The agencies and government entities or diplomatic representations of a foreign country are considered foreign public administration, no matter their level or sphere of government, as well as companies held directly or indirectly by the government of a foreign country.
For purposes of this law, a foreign government official is any individual who, although momentarily or without payment, holds a public position, employment or function in any public agency or entity or diplomatic representations of foreign country, and also in companies held directly or indirectly by the government of a foreign country or in any international public organization.

This definition encompasses a broad range of entities, including agents of the state, state-owned enterprises, international public organizations, and other instrumentalities of the state. This definition would make employees at these entities “foreign public officials.” The broad definition appears to stand in contrast with ongoing efforts in the United States to clarify or narrow the
meaning of that term.
Accounting Provisions. The Brazilian draft bill does not include any accounting provisions, as required under Article 8 of the OECD Anti-Bribery Convention. However, Brazil’s laws provide similar provisions elsewhere, which work to meet the OECD requirement as noted in the OECD Working Group Phase II Report. The report also notes that, while an advanced framework for accounting requirements exists under other laws, requirements under the law for internal controls have room for development.

The FCPAméricas blog is not intended to provide legal advice to its readers. The blog entries and posts include only the thoughts, ideas, and impressions of its authors and contributors, and should be considered general information only about the Americas, anti-corruption laws including the U.S. Foreign Corrupt Practices Act, issues related to anti-corruption compliance, and any other matters addressed. Nothing in this publication should be interpreted to constitute legal advice or services of any kind. Furthermore, information found on this blog should not be used as the basis for decisions or actions that may affect your business; instead, companies and businesspeople should seek legal counsel from qualified lawyers regarding anti-corruption laws or any other legal issue. The Editor and the contributors to this blog shall not be responsible for any losses incurred by a reader or a company as a result of information provided in this publication. For more information, please contact Info@MattesonEllisLaw.com.
The author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author.
@2012 Matteson Ellis Law, PLLC

Author: Matt Ellis

The End is Nigh for Facilitation Payments – Get Ahead of the Breeze

2012-01-08T10:08:00.000-08:00

Last summer, an article was published in the University of Pennsylvania, Journal of Business Law, entitled “The OECD’s Call for an End to the ‘Corrosive’ Facilitation Payments and the International Focus on the Facilitation Payments Exception under the Foreign Corrupt Practices Act”. It was authored by Jon Jordan, Senior Investigations Counsel, in the Foreign Corrupt Practices Act (FCPA) Unit of the Securities and Exchange Commission (SEC). In this article, Jordan reviews, at length, the creation of the facilitation payment exception to the FCPA and the international criticism of the US position by the Organization of Economic Co-operation and Development (OECD), Transparency International, the World Economic Forum and TRACE International. The article also contains a discussion of the hidden costs to US companies which still allow facilitation payments under their company compliance regimes. I found this article to be an excellent review of the issue of facilitation payments and a useful guide to the compliance practitioner on how to navigate this knotty problem.

Costs of Facilitation Payments
1. The Bull’s Eye
Jordan notes that the cost of making facilitation payments is often higher than simply the (purportedly) small dollar amount. He believes that once a company starts down the road of making such payments, it may well lead “to higher costs imposed on those companies that choose to engage in that type of activity.” He quotes Alexandra Wrage, President of TRACE International, that having a corporate policy of allowing facilitation payments is like “putting a bull’s eye on your company’s forehead” as the payment of facilitation payments sets “a permissive tone, which leads to more and greater demands.”
2. Books and Records Issues
A second reason detailed by Jordan is the hidden intra-corporate transaction costs in making facilitation payments. There are a “complex matrix of domestic and foreign anti-bribery laws that companies must navigate when making facilitation payments, and steering through that matrix can be a compliance nightmare and a costly legal undertaking.” The clearest example of this situation is the UK Bribery Act, which has no exception for facilitation payments. If your company has a UK subsidiary, or any employees who are UK citizens, you must carve out an exclusion for them from your facilitation payment exception under your FCPA compliance policy. Got that? So not only must you have an entire carve out in your compliance protocols, your internal accounting system, which is required under the FCPA to record internal controls, you must also make sure that no UK citizen or person otherwise under the jurisdiction of the UK Bribery Act, makes such a claim for reimbursement under your company policy.
3. Customers
The same is true for large UK based multi-national companies with which your company might transact business. The most obvious example in the energy arena is BP, which not only bans facilitation payments, but requires that any company which provides services for them ban facilitation payments made while doing work for or performing services on BP’s behalf. So think through how you would train your employees on how to properly make and record facilitation payments under your FCPA compliance policy with the HUGE EXCEPTION of when they might be performing some work under the 5 year Master Services Agreement with BP. It’s an administrative nightmare.
Is it Legal to Bribe?
Jordan also brings up the issue that there is not any country in which facilitation payments to public officials of that country are permitted under the written law of the recipient’s country. Accordingly, even if a particular facilitation payment qualifies for an exception of the FCPA, it, nevertheless, is likely to constitute a violation of local law – as well as under anti-bribery laws of other countries that also might apply simultaneously – and thus exposes the payer, his employer and/or related parties to prosecution in one or more jurisdictions. While enforcement to date in this area has been limited increased global attention to corruption makes future action more likely. Countries that are eager to be seen as combating corruption are prosecuting the payment of small bribes with greater frequency. Remember the hellish example of UK citizen Bill Smith, who was sentenced to two years imprisonment in an Afghanistan prison for making a ‘facilitation payment’ to get his company’s vehicles out of a Kabul impoundment lot. Apparently, even Afghanistan will fight the corruption of its own government officials, particularly if the fight involves a foreigner.
You Don’t Need a Weatherman
Jordan concludes by stating, “The facilitation payments exception has become a dinosaur remnant of a bygone era…” He advises US companies to get ahead of this issue and ban such payments in their company compliance programs now. This is sound advice. I would, however, add one additional reason for such advice, which is foretold in the intro paragraph to this article.
Who does the author work for and where does he work? Let’s recap: The SEC in the FCPA Unit. The article clearly states, “The Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement of its employees…and do not necessarily reflect the views of the Commission…” Did I mention who the author works for and where he works? You don’t need a weatherman to know which way the wind blows and the direction of that breeze you feel at your back about now is clearly running against allowing the facilitation payments to continue.

© Thomas R. Fox, 2012

First Conviction under the UK Bribery Act

2011-11-22T10:05:00.000-08:00

Munir Patel

(Reuters) - The first person to be convicted under new bribery laws was jailed on Friday November 18th, 2011, and lawyers said his sentence sent out a warning message to business.

Munir Patel, 22, a court clerk who worked at Redbridge Magistrates' Court in east London, had pleaded guilty to accepting 500 pounds to "get rid" of speeding charges by keeping the details off a court database.

He was given three years in prison for bribery offences and six years for misconduct in a public office, with the sentences to run concurrently, the Press Association reported.

"The sentencing ... demonstrates the significant sentences that the courts are willing to impose on individuals who commit an offence under the (Bribery) Act," said Angela Pearson, a partner with international law firm Ashurst.

"It is only a matter of time before the SFO (Serious Fraud Office) bares its teeth and prosecutes the first corporate or its directors under the Act. In the meantime, the business community collectively hold their breath."

The Bribery Act, which came into force in July, makes failure to prevent bribery - whether committed by staff, subsidiaries or "associated persons" anywhere in the world - a criminal offence.

It also clamps down on so-called "facilitation payments," often used to oil the wheels of business by speeding up services such as visa applications, and "disproportionate" hospitality.

Southwark Crown Court heard Patel had helped at least 53 individuals evade prosecution for driving offences, and that he had advised people on how to avoid being summoned to court.

His salary was 17,978 pounds, but the court heard that 53,814 pounds in cash was deposited in his bank account while another 42,383 pounds was transferred into the same account, both without explanation.

"It hardly needs saying that these were very serious offences," Judge Alistair McCreath said.

"A justice system in which officials are prepared to take bribes in order to allow offenders to escape the proper consequences of their offending is inherently corrupt and is one which deserves no public respect and which will attract none."
(Reporting by Michael Holden; editing by Andrew Roche)

Australia Considering Criminalizing Facilitation Payments

2011-11-16T10:26:00.000-08:00

Customer pays for a beer in central Sydney 21/06/2011 REUTERS/Tim Wimborne

Lawyers have welcomed the government's plans to bolster Australia's anti-bribery laws and outlaw facilitation payments, saying the changes would bring the country into line with international best practice and address the "weakest link" in the existing legislation.

In a consultation paper (PDF) launched yesterday the government outlined its proposals to remove the facilitation payments defence from s70.4 of the Criminal Code Act 1995. The reforms would align Australia's laws more closely with the UK's Bribery Act 2010, which took effect in July and has banned facilitation payments for UK-linked companies.

Unlike the UK and U.S., Australia does not have dedicated anti-bribery legislation. In Australia the act of bribing a foreign public official is proscribed under Division 70 of the Criminal Code. The legislation ensures that a person can be prosecuted under Australian law for "offering or providing a bribe to foreign public officials for the purpose of obtaining business or an undue business advantage". Like the UK and U.S. legislation it has extra-territorial effect and covers activities anywhere in the world.

In addition, Divisions 141 and 142 of the Criminal Code make it an offence to bribe a Commonwealth public official or for a Commonwealth public official to solicit a bribe.

Breaches of the legislation carry a maximum penalty of 10 years in prison and A$1.1 million fines for individuals and A$11m million in fines, or three times the benefit gained, for corporations. If the value of benefits obtained through bribery cannot be determined, the penalty for a company is 10 percent of annual turnover in cases where that amounts to more than A$1.1 million.

Brendan O'Connor, the minister for home affairs and justice, said there were strongly divergent views in Australia about the case for an exemption for facilitation payments. He said the purpose of the consultation was to get feedback from stakeholders about the merits or otherwise of removing the facilitation defence.

"I hear anecdotal evidence about the need to retain the defence because it is a reality of doing business, especially in the Asia-Pacific region," O'Connor said at the launch of the consultation paper. "I also note that, internationally, the defence of facilitation payments is gradually being removed from the criminal laws of our international trading partners. Maintaining the defence in Australia could appear incongruous with the aid and assistance message we send out in the region."

O'Connor said the government was aware that banning facilitation payments might put Australian businesses at a competitive disadvantage or in a "difficult situation" if payments were solicited under duress. It might also create an uneven playing field between large and smaller businesses. On the other hand, he said, it might also create greater consistency with the laws of other countries, promote regulatory certainty for businesses that operate across jurisdictions and help to reduce corruption globally. The government was also mindful that international developments, such as the commencement of the UK Bribery Act in July, had turned the tide against the facilitation payments defence.

Industry support

Within the legal and consulting sectors, there has been strong support for the government's decision to review the facilitation payments defence and other aspects of Australia's anti-bribery statutes.

Rob Locke, partner at Ernst & Young in Sydney, said that the latest consultation was further evidence of the global trend to take a harder line on facilitation payments. He said: "It is a timely and healthy initiative and a further sign that there is a global rethink about facilitation payments."

Christopher Keane, special counsel at Middletons, described the facilitation payment defence as the "weakest link" in Australia's foreign bribery legislation. He said the justifications for the defence were "tenuous at best" and said that businesses would be unwise to rely on this as part of their anti-bribery compliance frameworks.

"It is a very limited and complicated defence and is frequently misunderstood, thus exposing Australian businesses operating offshore to criminal liability in circumstances where they might genuinely believe they are acting lawfully," Keane said.

In essence, Keane said that there were three fundamental problems with the facilitation payments defence. "First, the defence is inconsistent with Australia's domestic laws. Secondly, the defence is inconsistent with the extra-territorial UK Bribery Act and the domestic laws of many of Australia's major trading partners. Thirdly, the most effective way for companies to avoid criminal liability arising under any anti-bribery legislation is to encourage a strong culture of compliance, whereas the facilitation payment defence is at the top of a very slippery slope that leads to serious criminal conduct," Keane said.

In view of all these issues, Keane said he was advising clients that Australian businesses should eliminate facilitation payments regardless of the outcome of the current consultation. "The safest approach is to proceed on the basis that there is no such thing as a facilitation payment defence," he said.

Extra-territorial impact

For Australian businesses that have links to the UK, the decision on proscribing facilitation payments has already been made. According to consultants at KPMG, Australian businesses with operations in the UK have already had to take a harder line on facilitation payments. These firms, as well as Australian subsidiaries of UK parent companies, are not only subject to the Australian anti-bribery laws but also to the requirements of the UK Bribery Act.

David Luijerink, partner at KPMG Forensic, said that those businesses with links to the UK could already be found guilty of an offence under the UK laws if they were unable to prove they had adequate procedures in place to prevent people from committing bribery. This applied not only to the activities of their employees but also to third-party associates, such as business partners, agents and contractors.

Luijerink noted: "It is important to note that the Act also covers the actions of non-UK nationals or residents. This means that an Australian business that transacts with the UK could very well find itself facing charges over illegal conduct by a non-British employee or a contractor, or for failing to prevent a third-party supplier from paying or receiving a bribe, even if the misconduct took place in another country."

He added that, under the new legislative landscape, firms would not be able to claim they were ignorant of facilitation payments that were happening under their watch. "Businesses need to cultivate a deeper culture of compliance and be able to demonstrate that they have sufficient risk management practices embedded in the business to mitigate bribery risks. Citing corporate ignorance in this instance will offer no protection from the long reach of the Act," Luijerink said.

A recent report from KPMG, entitled the "Global Anti-Bribery and Corruption Survey 2011", revealed that one third of businesses in the UK and U.S. did not assess the risk of bribery or corruption. Of those with written anti-bribery and corruption policies, 40 percent did not distribute them to relevant third parties and 60 percent did not require third-party representatives to participate in anti-bribery compliance training.

The survey also found that most anti-bribery and corruption compliance programs lacked sufficient depth and breadth to offset any regulatory risk effectively.

Luijerink said: "The potential costs of involvement in bribery and corruption are not limited to economic costs but also extend to reputational harm, and businesses need to weigh up whether not complying with the Act is a risk they can afford."

Broader discussion

Consultants and lawyers have said that, in Australia, the reform of the anti-bribery laws will have to take into account all of these major international developments. As well as the facilitation payments issue, the review of Divisions 70 and 141 of the Criminal Code will also explore a number of related issues regarding the anti-bribery statutes. Under the existing laws, courts must disregard the value of a benefit when determining whether a benefit was "legitimately due". This is to ensure that bribery is an offence irrespective of the value of the benefit.

As an example, the consultation paper stated that there might be situations where a person would be legitimately due a moderate fee in return for providing a particular service connected with obtaining business. "However, in the same situation a very large fee may be highly improper and not legitimately due to the public official or other person," it stated.

The government is considering whether to change para 70.2(2)(b) to clarify that bribery is an offence irrespective of the value of the benefit offered or given.

The consultation has also looked at changing the laws to ensure that prosecutions can proceed where a recipient of a bribe cannot be identified. To achieve this, the laws would need to be changed so that it is not necessary to prove an intention to influence a particular official. This will ensure that the law covers circumstances where a bribe is paid but the particular official to whom the bribe was destined cannot be identified.

The consultation paper stated: "For example, it may be possible to prove a person offered or provided a bribe to an agency in charge of granting public infrastructure contracts, but not possible to identify whether the payment is destined for the official directly responsible for granting contracts or another official who will direct their staff to grant a certain contract."

The final significant reform would be to change the laws so that "dishonesty" was not a requirement of the domestic bribery offence. Under the foreign bribery laws (Division 70) there is an obligation to demonstrate that bribery was committed intentionally but not necessarily "dishonestly". The government has proposed to align the offences in Divisions 141 and 142 with Division 70 by removing the "dishonesty" requirement from these offences, which would assist with the harmonisation of domestic and foreign bribery offences.

The paper noted that "the requirement in Divisions 141 and 142 to prove dishonesty as well as bribery could make it more difficult to prosecute crimes of domestic corruption".

O'Connor said that stakeholders should make the most of the opportunity to improve Australia's anti-bribery laws and to bring them more closely into line with those in other jurisdictions.

"While we consider that we have strong laws to combat foreign bribery, we want to examine our legislation in light of international developments and hear from you about the reality of doing business beyond our shores," he said.

Responses to the consultation paper (PDF) need to be lodged by December 15, 2011.

(A$1 = US$1.01)

United Kingdom: Redefining The Criminal Cartel Offence

2011-10-27T04:53:00.000-07:00

This article was first published in Competition Law Insight, 18 October 2011. Corker Binning is a law firm specialising in fraud, regulatory litigation and general criminal work of all types. For further information go to http://www.corkerbinning.com

In March 2011 the government published a lengthy consultation paper which set out proposals for a wide-ranging reform of the UK competition regime. One section of this consultation paper was devoted to the criminal cartel offence under the Enterprise Act 2002. The government argued that the need to prove dishonesty as an element of this offence had made prosecutions too difficult and, in consequence, the introduction of the offence in 2003 had not had the intended deterrent effect. The paper puts forward four options for a new model offence with a preference for the one which would criminalise secret price-fixing agreements with no requirement to prove dishonesty as a specific ingredient of the offence. But is this the right approach and is it too soon to be proposing such a radical change?
The government's proposals attracted a large number of responses. A quick survey shows them to be uniformly hostile to the removal of the dishonesty element. They almost all make the same central point: paucity of cases is not necessarily an indication that the regime is not functioning well. To put this another way, there is insufficient evidence to establish that the dishonesty element has led to otherwise strong cases not being brought to court.

The OFT's mediocre record to date

Plainly the OFT's performance in relation to prosecutions of this offence is a matter of legitimate public concern. In the last eight years there have only been two prosecutions. And in the only one of these which was contested (BA-Virgin or R v George), the OFT's case collapsed because of its inadequate capability to deal with certain investigatory procedures. So on the face of it, enforcement of this offence is not working out as the government intended.
However, a fair appreciation of the OFT's record needs to take account of three important factors - all of which work against the bringing of prosecutions. First, in the realm of competition law enforcement generally, the main weapon available to regulators is leniency. In common with the US approach, the OFT believes that the best means to achieve compliance is a clear policy which encourages cartel participants to report themselves. This is underpinned by the opportunity to achieve a non-prosecution outcome in some cases. So a lack of prosecutions may in fact be a measure of the OFT's success. In order to fairly determine this, what is needed is an evaluation of the leniency applications made since 2003 to see how many of them were made partly out of a desire to limit the threat of a prosecution.
Secondly, as the international record of criminal cartel enforcement demonstrates, the majority of alleged cartels which are selected for prosecution are, for reasons beyond the scope of this article, bipartite ones. Unlike civil litigation, prosecutions tend to be of one set of participants connected to company A with the other set connected to Company B being immunised prosecution witnesses, as in the BA-Virgin case. As any prosecutor well knows, a case built on the purported credibility and honesty of witnesses from A whose evidence has only been obtained as a result of an immunity deal and whose conduct was the same as the accused from B will always be a risky one. The witnesses may turn sour on the prosecutor and the court may regard the prosecution with distaste taking account of the fact that pragmatism has apparently scored over principle and that the accused have palpably been singled out for prosecution whilst the others happened to do a deal which meant they escaped justice so long as they heaped blame on the accused. Whilst these problems may also infect a more multi-party case, the mirror-image issue is unlikely to be as pronounced.
Thirdly, the likelihood is that most cartel investigations are multi-jurisdictional with the implication that what one enforcer does in one country is likely to shape the approach of others. A decision made in, for example, the US by the cartels section of the Department of Justice to settle a case via a non-prosecution agreement is likely to fetter the ability of the OFT to prosecute anyone concerned in the same alleged cartel. So an antecedent and often uncoordinated decision by one prosecutor to extend leniency can lead to other prosecutors having to accept they have to act likewise. This is not a problem confined to cartels; much of the SFO's work concerning overseas corruption has been stymied by an announcement made in Washington DC that the criminal investigation there is all over.
Rather than considering changes to the offence itself, it may be better to look instead at measures designed to improve the OFT's capacity to bring cartel prosecutions successfully. Indeed this in essence was the conclusion reached by the OFT itself in its Project Condor Board Review published in December 2010. Undoubtedly the OFT has sought to implement many of its recommendations and some time must elapse before they bear fruit. Criminal cartel investigations take a long time as the subject-matter is invariably complex; for example on 4 October 2011, the OFT announced it had dropped its probe of a company executive (just one) in the automotive components industry having first arrested him in February 2010.

Why the dishonesty element is worth preserving

When the offence was first mooted by the then government and later considered during the Act's legislative passage, this element and the rationale for its inclusion in the new offence attracted considerable attention and debate. It did not slip into the Act during a late night parliamentary sitting or, like SOCPA 2005 which created the now to be abolished SOCA, get nodded through in a parliamentary rush on the eve of a general election. The case for change as now advocated should begin with the issue of whether it is proper in relation to an offence which alleges serious criminality and in respect of which the maximum penalty is five years' imprisonment, that there should no longer be any need to establish an accused's dishonesty.
If a reworded cartel offence did not include the requirement to prove dishonesty, this would constitute a remarkable and troubling exception to the tradition of English criminal law when serious criminal conduct is involved. In economic crime, the offences applicable to the serious criminal conduct of individuals created either by the common law (such as conspiracy to defraud and offences of cheating the public revenue) or by statute (such as the Fraud Act 2006) have all included an element of conscious impropriety. Whilst this mental element may be expressed in slightly different terms in the calendar of offences falling within the rubric of economic crime, essentially they mostly require proof of dishonesty. One cannot defraud or cheat by mere recklessness or negligence. Of course there are offences of strict liability applicable to individuals as well as companies but these tend to be summary only offences where the conduct is not nearly so serious as in the more serious offences such as criminal cartel activity.
The creation of new criminal offences has usually been preceded by a public consensus that the conduct to be criminalised is that which the majority of the public regard as nefarious or seriously harmful to the public interest. If the government contends that a criminal offence needs to be made easier to prove because a jury will otherwise not convict, one must ask whether such reluctance reflects a widespread perception that the conduct should not be prosecuted at all. So in the case of the cartel offence, is the perceived difficulty about proving dishonesty rooted in a fear that the public generally believe that anti-competitive activity is best sanctioned by the civil and not criminal law? Without a jury ever having had the opportunity to consider a verdict in respect of this offence, this question remains a real one.
The proposals also fail to take into account the detailed consideration given to the reform of the law on fraud by the Law Commission in its 2002 report which gave rise to the Fraud Act 2006. Instead, it refers to an earlier 1999 Law Commission report. In its 2002 report, the Law Commission found that the R v Ghosh definition of dishonesty is unproblematic for jurors - a vital element of a large number of criminal offences - and that to abandon it would have a significant impact on the criminal justice system.

The government's four options for reform

Whilst it is argued that none of these proposals for reform are superior to the current offence, each requires a brief mention.

Reliance on prosecutorial guidance. The DPP's recent guidance on prosecuting cases of assisting suicide may be analogous. But do we want to rely on prosecutors to tell us what should be a tort and what should be an offence? It becomes very difficult for a prosecutor to fairly distinguish one form of alleged "hard-core" cartel behaviour from another and so decide which to take no action against and which to prosecute. Surely it is preferable that the statute defines the offence and that the current formula of requiring cogent evidence of dishonesty is a suitable way of discriminating one alleged cartel from another?

Excluding the offence for a list of virtuous or "white-listed" price-fixing agreements. It is difficult to see how such an approach would avoid the vice of uncertainty. Surely any purportedly benign agreement would be pro not anti-competitive and establishing this would invite a plethora of expert evidence into the criminal courtroom. Moreover, the burden of proving this would inevitably be cast onto the accused.

A secrecy criterion. Such an element would be a novel one for our criminal jurisprudence in contrast to the settled law on dishonesty. Distinguishing legitimate confidentiality in commercial transactions from the concept of secrecy would seem a difficult test to apply in reality and thus allow for lawyers to endlessly argue it is the former not the latter. And why should secrecy be the proper moral foundation for distinguishing civil from criminal conduct?

Defining the offence to exclude agreements made openly. But "openly" in relation to whom? The immediate customer who may be another wholesaler able to absorb a price increase by passing it on, or the ultimate retail customer unable to easily do so? Surely the kinds of cartels which most deserve prosecution are those which harm individual consumers, in relation to whom the concept of agreements between suppliers made openly or not has no application.

Conclusion

There is plenty of cartel activity around the world but national and regional competition regimes vary considerably in the enforcement tools available to them. Criminal penalties do operate as significant deterrents if they are backed up by real cases coming to court. In the UK at least, the criminal cartel regime needs time to develop with more resources for investigation and prosecution. Removing dishonesty as an element of the cartel offence is an easy option but it may not speed up investigations or make prosecutions before juries easier. The government may have its work cut out to come up with a better regime than the one we have at present.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

IDB List of Sanctioned Firms and Individuals

2011-08-30T10:40:00.000-07:00

The firms and individuals listed below have been sanctioned by the IDB Group’s Sanctions Committee because they were found to have engaged in fraud, corruption, collusion or coercion, in violation of the IDB Group’s anti-corruption policies. These findings were made through an administrative process that permitted the accused firms and/or individuals to respond to the allegations pursuant to the Sanctions Procedures. Sanctions are meant to prevent and deter fraud and corruption in IDB Group-financed activities.

The Sanctions Committee may impose any sanction that it deems to be appropriate under the circumstances, including but not limited to reprimand, conditions on future contracting and debarment. Debarred firms are declared ineligible to be awarded and participate in any IDB-financed contract for the periods indicated. Ineligibility may extend to any firm or individual who directly or indirectly controls the debarred firm or any firm which the debarred firm directly or indirectly controls. In the case of a debarred individual, ineligibility may extend to any firm which the debarred individual directly or indirectly controls.

IDB Group's list of Sanctioned Firms and Individuals

Name	Entity Type/Nationality	Title Affiliation	Country of Project	Ineligibility From	Ineligibility To	Grounds
Öztaþ Ýnþaat inþaat Malzemeleri Ticaret Anonim Þirketi of Iller Sokak	Corporation/Turkey		Georgia	9/26/20111	9/26/2014	Fraudulent Practices, Cross-Debarment notice from the World Bank
Glosolve Limited	Corporation/United Kingdom		Mongolia	04/01/2014	03/31/2018	Fraudulent Practices, Cross-Debarment notice from the World Bank
Global Technology Solutions, Inc	Corporation/USA		Mongolia	04/01/2014	03/31/2018	Fraudulent Practices, Cross-Debarment notice from the World Bank
The Glocoms Group, Inc.	Corporation/USA		Mongolia	04/01/2014	03/31/2018	Fraudulent Practices, Cross-Debarment notice from the World Bank
Maurence Anguh	Person/USA		Mongolia	04/01/2014	03/31/2018	Fraudulent Practices, Cross-Debarment notice from the World Bank
Glocoms, Inc	Corporation/USA		Mongolia	04/01/2014	03/31/2018	Fraudulent Practices, Cross-Debarment notice from the World Bank
Gregory Ilias Lee also known as Greg Lee or Gregory Lee	Individual/Australia	Individual	Indonesia	08/02/2011	08/01/2014	Fraudulent Practices - Cross Debarment from The World Bank
Hefei Highway & Bridge Project Co. Ltd.	Firm/China		China	06/28/2011	06/27/2013	Fraudulent Practices - Cross Debarment from The World Bank
Human Resources Development Organization (HURDO)	Firm/Bangladesh		Bangladesh	07/29/2011	07/28/2015	Fraudulent Practices - Cross Debarment from The World Bank
Mr. Md. Shamul Alam	Individual/Bangladesh		Bangladesh	07/29/2011	07/28/2015	Fraudulent Practices - Cross Debarment from The World Bank
Lasservice NV	Firm/Belgium		Gambia	06/03/2011	06/02/2013	Fraudulent Practices - Cross Debarment from The World Bank
Mr. Joseph Nuijten	Individual/Belgium		Gambia	06/03/2011	06/02/2013	Fraudulent Practices - Cross Debarment from The World Bank
Marvel Novedi	Firm/France		Democratic Republic of Congo	07/26/2011	07/25/2014	Fraudulent Practices - Cross Debarment from The World Bank
Marvel SA	Firm/France		Democratic Republic of Congo	07/26/2011	07/25/2014	Fraudulent Practices - Cross Debarment from The World Bank
Marvel SAS	Firm/France		Democratic Republic of Congo	07/26/2011	07/25/2014	Fraudulent Practices - Cross Debarment from The World Bank
Societe Marvel	Firm/France		Democratic Republic of Congo	07/26/2011	07/25/2014	Fraudulent Practices - Cross Debarment from The World Bank
Dr. Hans Peter Schone	Individual/Germany		Russia	08/17/2011	08/16/2016	Fraudulent Practices - Cross Debarment from The World Bank
Proveeduría Medica	Firm/Argentina		Argentina	06/16/2011	06/15/2014	Fraudulent Practices - Cross Debarment from The World Bank
Association Muhandison	Firm/Tajikistan		Tajikistan	06/01/2011	05/31/2014	Fraudulent Practices - Cross Debarment from The World Bank
LLC UN&CO	Firm/Tajikistan		Tajikistan	06/01/2011	05/31/2014	Fraudulent Practices - Cross Debarment from The World Bank
Mr. K. M. Rahman	Individual/Bangladesh		Bangladesh	07/29/2011	07/28/2015	Fraudulent Practices - Cross Debarment from The World Bank
Samajik Sangha (SS)	Firm/Bagladesh		Bangladesh	07/29/2011	07/28/2015	Fraudulent Practices - Cross Debarment from The World Bank
Sego Ventures Nigeria Limited	Firm/Nigeria		Nigeria	06/03/2011	06/02/2013	Fraudulent Practices - Cross Debarment from The World Bank
Mrs. Shamsunnahar	Individual/Bangladesh		Bangladesh	08/22/2011	08/21/2015	Fraudulent Practices - Cross Debarment from The World Bank
Development Action Centre (DAC)	Firm/Bangladesh		Bangladesh	08/22/2011	08/21/2015	Fraudulent Practices - Cross Debarment from The World Bank
Mr. Sealtiel Orozco	Individual/Nicaragua		Nicaragua	08/23/2011	08/22/2013	Fraudulent Practices - Cross Debarment from The World Bank
Telecomunicaciones y Sistemas S.A.	Firm/Nicaragua		Nicaragua	08/23/11	08/22/2013	Fraudulent Practices - Cross Debarment from The World Bank
Karma Mara, Indonesia	Individual/Indonesia		Indonesia	05/17/2011	05/16/2013	Non-specified Practices - Cross-debarment from The Asian Development Bank
Tiyasa Suwarly M	Individual/Indonesia		Indonesia	05/17/2011	05/16/2017	Non-specified Practices - Cross-debarment from The Asian Development Bank
lr. Widhiastoto	Individual/Indonesia		Indonesia	05/17/2011	05/16/2017	Non-specified Practices - Cross-debarment from The Asian Development Bank
Akhtar M. Babul M	Individual/Bangladesh		Bangladesh	05/17/11	05/16/15	Non-specified Practices - Cross-debarment from The Asian Development Bank
PT Multi Area Conindo	Firm/Indonesia		Indonesia	05/17/2011	05/16/2017	Non-specified Practices - Cross-debarment from The Asian Development Bank
YANG LIN	Individual/China		Sudan	05/11/2011	05/10/2014	Fraudulent Practices - Cross-Debarment from The World Bank
Zhejiang Zheda Insigma Technology Co. Ltd	Firm/China		Bulgaria	08/01/2011	07/31/2014	Fraudulent Practices - Cross-Debarment from the European Bank for Reconstruction and Development
Zhejiang Zheda Insigma Group Co. Ltd.	Firm/China		Bulgaria	08/01/2011	07/31/2014	Fraudulent Practices - Cross-Debarment from the European Bank for Reconstruction and Development
Idreco S.p.A	Firm/Italy		Bulgaria	08/01/2011	07/31/2014	Fraudulent Practices - Cross-Debarment from the European Bank for Reconstruction and Development
Idreco Invest S.p.A.	Firm/Italy		Bulgaria	08/01/2011	07/31/2014	Fraudulent Practices - Cross Debarment from the European Bank for Reconstruction and Development
SDC Consulting Co. Limited Cambodia	Firm/Cambodia		N/A	07/12/2011	07/11/2021	Fraudulent Practices - Cross Debarment from the Asian Development Bank
Sustainable Development Consultants Cambodia Limited	Firm/Cambodia		N/A	07/12/2011	07/11/2021	Fraudulent Practices - Cross Debarment from the Asian Development Bank
Ly Moni Roth	Individual/Cambodia		N/A	07/12/2011	Indefinite	Fraudulent Practices - Cross Debarment from the Asian Development Bank
Syani Phirom	Individual/Cambodia		N/A	07/12/2011	Indefinite	Fraudulent Practices - Cross Debarment from the Asian Development Bank
Sukhjin Co. Ltd	Firm/Mongolia		N/A	07/12/2011	07/11/2018	Fraudulent Practices - Cross-Debarment from the Asian Development Bank
Luis Adolfo Pérez Obregón	Individual/Nicaragua		Nicaragua	06/22/2011	06/22/2013	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1702/SF-NI
Teresa Antonia Pérez Brenes	Individual/Nicaragua		Nicaragua	06/22/2011	06/22/2013	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1702/SF-NI
Luis Adolfo Pérez Brenes	Individual/Nicaragua		Nicaragua	06/22/2011	06/21/2016	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1702/SF-NI
Empresa Constructora Luis Pérez Brenes S.A.	Firm/Nicaragua		Nicaragua	06/22/2011	06/22/2016	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1702/SF-NI
Mario Alirio Palacios Quiceno	Individual/Colombia		Colombia	06/22/2011	06/22/2014	Fraudulent practices, Art. 5.02 (c)(ii) General Conditions Contract Agreement 1950/OC-CO
Gabriel Jean-Charles	Individual/Haiti		Haiti	06/22/2011	06/22/2021	Corruptive practices. Art 5.02 (c)(i) General Conditions Contract Agreement 1491/SF-HA
Marylyn Paul Theodore	Individual/Haiti		Haiti	06/22/2011	06/22/2016	Corruptive practices. Art 5.02 (c)(i) General Conditions Contract Agreement 1491/SF-HA
Ronald Theodore	Individual/Haiti		Haiti	06/22/2011	06/22/2016	Corruptive practices. Art 5.02 (c)(i) General Conditions Contract Agreement 1491/SF-HA
Chantiers Modernes d'Haiti	Firm/Haiti		Haiti	06/22/2011	06/22/2016	Corruptive practices. Art 5.02 (c)(i) General Conditions Contract Agreement 1491/SF-HA
Marcos Mario Medina Castillo	Individual/Bolivia	Legal Representative of Fokus Proyecciones	Bolivia	03/22/2011	03/22/2014	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1091/SF-BO
Fokus Proyecciones	Firm/Bolivia		Bolivia	03/22/2011	03/22/2014	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1091/SF-BO
Gean Carlo Gutiérrez Morón	Individual/Peru		Peru	03/22/2011	03/22/2014	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1591/OC-PE
Pedro Miguel Távara Salazar	Individual/Peru		Peru	03/22/2011	03/22/2014	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1591/OC-PE
Miguel Ángel Zárate Mardueño	Individual/Mexico	Legal Representative of Moctezur Construcciones S.A. de C.V. (MOCTEZUR)	Mexico	03/03/2011	03/03/2014	Fraudulent practices. Art. 3.1 (a)(iii)General Conditions applicable to the Tender Documents. Contract Agreement 1744/OC-ME
Moctezur Construcciones S.A. de C.V. (MOCTEZUR)	Firm/Mexico		Mexico	03/03/2011	03/03/2014	Fraudulent practices. Art. 3.1 (a)(iii)General Conditions applicable to the Tender Documents. Contract Agreement 1744/OC-ME
Abraham de Jesús Berrios Hernández	Individual/Guatemala	Legal Representative of Administradora de Marcas S.A.	Guatemala	03/02/2011	03/02/2014	Fraudulent practices. Art. 1.14 (a)(ii)General Conditions Contract Agreement 1469/OC-GU
Administradora de Marcas S.A.	Firm/Guatemala		Guatemala	03/02/2011	03/02/2014	Fraudulent practices. Art. 1.14 (a)(ii)General Conditions Contract Agreement 1469/OC-GU
Lenin Medina Porras	Individual/Mexico	Legal Representative of Probain de Occidente SRL de C.V. (PROBAIN)	Mexico	02/07/2011	02/07/2014	Fraudulent practices, Art. 5.02 (c)(ii) General Conditions Contract Agreement 1383/OC-ME
Probain de Occidente SRL de C.V. (PROBAIN)	Firm/Mexico		Mexico	02/07/2011	02/07/2014	Fraudulent practices, Art. 5.02 (c)(ii) General Conditions Contract Agreement 1383/OC-ME
Gustavo Cimar Unzueta Sossa	Individual/Bolivia		Bolivia	02/07/2011	Permanent	Corruptive practices. Art 5.02 (c)(i) General Conditions Contract Agreement 1075/SF-BO
José Luis Valadez	Individual/Mexico	Legal Representative of Constructora y Arrendadora Cogral, S.A. de C.V.	Mexico	02/07/2011	02/07/2014	Fraudulent practices, Art. 5.02 (c)(ii) General Conditions Contract Agreement 1744/OC-ME
Constructora y Arrendadora Cogral, S.A. de C.V.	Firm/Mexico		Mexico	02/07/2011	02/07/2014	Fraudulent practices, Art. 5.02 (c)(ii) General Conditions Contract Agreement 1744/OC-ME
Constructora Carrera	Firm/Guatemala		Guatemala	02/07/2011	02/07/2014	Fraudulent practices, Art. 5.02 (c)(ii) General Conditions Contract Agreement 1469/OC-GU
Israel Carrera Palencia	Individual/Guatemala	Legal Representative of Constructora Carrera	Guatemala	02/07/2011	02/07/2014	Fraudulent practices, Art. 5.02 (c)(ii) General Conditions Contract Agreement 1469/OC-GU
Gerardo Rafael Barreto Maldonado	Individual/Bolivia		Bolivia	01/20/2011	01/20/2014	Fraudulent practices, Art. 5.02 (c)(ii) General Conditions Contract Agreement 1557/SF-BO
Víctor Juan Pereira	Individual/Bolivia	General Manager of Ingeniería Prefabricados y Construcción S.R.L. - IPRECO	Bolivia	01/20/2011	01/20/2016	Fraudulent practices, Art. 5.02 (c)(ii) General Conditions Contract Agreement 1557/SF-BO
Ingeniería Prefabricados y Construcción S.R.L. - IPRECO	Firm/Bolivia		Bolivia	01/20/2011	01/20/2016	Fraudulent practices, Art. 5.02 (c)(ii) General Conditions Contract Agreement 1557/SF-BO
Ramón Enrique Moreno	Individual/Honduras		Honduras	01/21/2011	01/21/2014	Corruptive practices. Art 5.02 (c)(i) General Conditions Contract Agreement 1059/SF-HO
Leonardo Morales Ordoñez	Individual/Ecuador		Ecuador	10/08/2010	10/08/2013	Corruptive practices. Art 5.02 (c) General Conditions Contract Agreement 1802/OC-EC
Escuela Andaluza de Salud Pública (EASP)	Firm/España		Argentina	09/15/2010	09/15/2013	Corruptive practices. Art 5.02 (c)(i) General Conditions Contract Agreement 1193/OC-AR
Juan José Pérez Brenes	Individual/Nicaragua	Legal Representative of Compañía Ing. Juan José Pérez Brenes	Nicaragua	09/15/2010	09/15/2013	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1100/SF-NI
Carlos Fernando Laje	Individual/Argentina		Argentina	09/15/2010	09/15/2015	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1193/OC-AR
Enrique Eduardo Rozenblat	Individual/Argentina		Argentina	09/15/2010	09/15/2015	Fraudulent practices, Art. 5.02(c)(iii) General Conditions Contract Agreement 1193/OC-AR
Proveedora Ferretera	Firm/Honduras		Honduras	5/3/2010	Permanent	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1077/SF-HO
Ramon de Jesus Flores Castro	Individual/Honduras	Legal representative and general manager of Proveedora Ferretera	Honduras	5/3/2010	Permanent	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1077/SF-HO
Juan José Zavala Reyes	Individual/Nicaragua	Legal Representative of Construcciones Alaniz y Compañía Limitada	Nicaragua	4/5/2010	4/5/2013	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1702/SF-NI
Judith Leticia Ayala Talavera	Individual/Paraguay		Paraguay	4/5/2010	4/5/2013	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1448/OC-PR
Compañia de la Construccion Sociedad Anonima de Capital Variable – CODECON S.A. de C.V.	Firm/Honduras		Honduras	3/19/2010	Permanent	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1048/SF-HO
Vladimir Su Yañez	Individual/Honduras	Legal Representative of Compañia de la Construccion Sociedad Anonima de Capital Variable – CODECON S.A. de C.V.	Honduras	3/19/2010	Permanent	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1048/SF-HO
S y S Ingeniería y Consultoría Ltda.	Firm/Colombia		Colombia	3/19/2010	3/19/2013	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1825/OC-CO
Janeth Patricia Sanabria Rodríguez	Individual/Colombia	Legal Representative of S y S Ingeniería y Consultoría Ltda.	Colombia	3/19/2010	3/19/2013	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1825/OC-CO
Juan Carlos Sanabria Rodríguez	Individual/Colombia	Engineer of S y S Ingeniería y Consultoría Ltda.	Colombia	3/19/2010	3/19/2013	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1825/OC-CO
Juan Domingo Tablares Aliaga	Individual/Bolivia		Bolivia	7/10/2009	Permanent	Fraudulent and extortionary practices, Art. 6 (d)(ii) (iii), Applicable Norms to Technical Cooperation ATN/ME-9627-BO
José Raymundo Velásquez Zepeda	Individual/Honduras		Honduras	7/10/2009	7/10/2012	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1115/SF-HO
Felipe Edgardo Oyuela Silva	Individual/Honduras		Honduras	7/10/2009	7/10/2012	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1115/SF-HO
Nicolás Javier Meléndez Velásquez	Individual/Honduras		Honduras	7/10/2009	7/10/2012	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1115/SF-HO
Ivar Demóstenes Castellanos Ibañez	Individual/Bolivia		Bolivia	6/30/2009	6/30/2012	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1057/SF-BO
Martín Javier Battiti	Individual/Honduras		Honduras	6/30/2009	6/30/2014	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1059/SF-HO
Raúl Pernia Ruíz	Individual/Colombia		Colombia	6/15/2009	6/15/2013	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 910/OC-CO
Ricardo Augusto Reynoso González	Individual/Guatemala	General Manager, Vice President, Partner and Legal Representative of Sistemas de Investigación de Mercados, SA (SIM)	Guatemala	6/15/2009	Permanent	Fraudulent practices, Art. 6 (d) (iii), Applicable Norms to Technical Cooperation ATN/ME-6537-GU
Hans Estuardo Caderón Palacios	Individual/Guatemala	Project Supervisor and Sub-coordinator	Guatemala	6/15/2009	Permanent	Fraudulent practices, Art. 6 (d) (iii), Applicable Norms to Technical Cooperation ATN/ME-6537-GU
Acceso, Accesorios, Complementos y Servicios	Firm/Guatemala		Guatemala	3/12/2009	3/12/2014	Collusive Practices, Art. 5.02 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Luis Rafael Guerra Sandoval	Individual/Guatemala	Owner of Acceso, Accesorios, Complementos y Servicios	Guatemala	3/12/2009	3/12/2014	Collusive Practices, Art. 5.02 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Proyectos Elite	Firm/Guatemala		Guatemala	3/12/2009	3/12/2014	Collusive Practices, Art. 5.02 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Marvin Estuardo Escobar Ruano	Individual/Guatemala	Owner of Proyectos Elite	Guatemala	3/12/2009	3/12/2014	Collusive Practices, Art. 5.02 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Maquimar S.A.	Firm/Guatemala		Guatemala	3/12/2009	3/12/2014	Collusive Practices, Art. 5.02 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Francisco Javier Martinez Espinoza	Individual/Guatemala	Owner of Maquimar S.A.	Guatemala	3/12/2009	3/12/2014	Collusive Practices, Art. 5.02 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Consultora Tecnodinámica S.R.L.	Firm/Paraguay		Paraguay	2/9/2009	Permanent	Fraudulent Practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1278/OC-PR
Consultora Guaraní S.A. Ingenieros Civiles	Firm/Paraguay		Paraguay	2/9/2009	Permanent	Fraudulent Practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1278/OC-PR
Consorcio Tecnodinámica y Asociados	Firm/Paraguay		Paraguay	2/9/2009	Permanent	Fraudulent Practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1278/OC-PR
Graciela Beatriz Modesto Merlo	Individual/Paraguay	Legal Representative of Consultora Guaraní	Paraguay	2/9/2009	Permanent	Fraudulent Practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1278/OC-PR
Julio Vicente Ullón Espinola	Individual/Paraguay	Legal Representative of Consultora Tecnodinámica	Paraguay	2/9/2009	Permanent	Fraudulent Practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1278/OC-PR
Pericles Modesto Schussmuller	Individual/Paraguay	Legal Representative of Consultora Guaraní	Paraguay	2/9/2009	Permanent	Fraudulent Practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1278/OC-PR
José Gustavo Modesto Merlo	Individual/Paraguay	Legal Representative of Consultora Guaraní	Paraguay	2/9/2009	Permanent	Fraudulent Practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1278/OC-PR
Constructora RGH Contratistas Generales S.R.L.	Firm/Perú		Perú	2/9/2009	2/9/2012	Fraudulent Practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1325/OC-PE
Consorcio Leoncio Cárdenas Morán y Constructora RGH Contratistas Generales S.R.L.	Firm/Perú		Perú	2/9/2009	2/9/2012	Fraudulent Practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1325/OC-PE
Richard Guevara Herrera	Individual/Perú	Manager of Constructora RGH Contratistas Generales S.R.L.	Perú	2/9/2009	2/9/2012	Fraudulent Practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1325/OC-PE
Leoncio Cárdenas Morán	Individual/Perú	Legal Representative of Consorcio Leoncio Cárdenas Morán y Constructora RGH Contratistas Generales S.R.L.	Perú	2/9/2009	2/9/2012	Fraudulent Practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1325/OC-PE
Diseño y Construccion en Ingenieria Civil y Agricola S.A.	Firm/Guatemala		Guatemala	1/26/2009	1/26/2014	Collusive Practices, Art. 5.02 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Luis Fernando Espino Montenegro	Individual/Guatemala	Legal Representative and Owner of Diseño y Construccion en Ingenieria Civil y Agricola S.A.	Guatemala	1/26/2009	1/26/2014	Collusive Practices, Art. 5.02 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Diseño de Ingenieria de Riego y Agua S.A.	Firm/Guatemala		Guatemala	1/26/2009	1/26/2014	Collusive Practices, Art. 5.2 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Victor Manuel Chavez	Individual/Guatemala	Legal Representative and Owner of Diseño de Ingenieria de Riego y Agua S.A.	Guatemala	1/26/2009	1/26/2014	Collusive Practices, Art. 5.2 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Agroservicios M&M	Firm/Guatemala		Guatemala	1/26/2009	1/26/2014	Collusive Practices, Art. 5.02 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Milagro Amparo Escobar Sandoval de Sandoval	Individual/Guatemala	Owner of Agroservicios M&M	Guatemala	1/26/2009	1/26/2014	Collusive Practices, Art. 5.02 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Consulfrutha S.A.	Firm/Guatemala		Guatemala	1/26/2009	1/26/2014	Collusive Practices, Art. 5.02 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Jorge Mario Cabrera Madrid	Individual/Guatemala	Owner and Manager of Consulfrutha S.A.	Guatemala	1/26/2009	1/26/2014	Collusive Practices, Art. 5.02 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Cesar Augusto Juarez Barreta	Individual/Guatemala	Legal Representative and Owner of Consulfrutha S.A.	Guatemala	1/26/2009	1/26/2014	Collusive Practices, Art. 5.02 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Agrosistemas B.S.	Firm/Guatemala		Guatemala	1/26/2009	1/26/2014	Collusive Practices, Art. 5.02 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Byron Leonel Sandoval Castañeda	Individual/Guatemala	Legal Representative and Owner of Agrosistemas B.S.	Guatemala	1/26/2009	1/26/2014	Collusive Practices, Art. 5.02 (c)(iv) General Conditions Contract Agreement 1331/OC-GU
Gabinete Tecnico, S.A. de C.V. (GATESA)	Firm/Honduras		Honduras	1/26/2009	1/26/2014	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1053/SF-HO
Juan Jacobo Káttan Káttan	Individual/Honduras	Partner of GATESA	Honduras	1/26/2009	1/26/2014	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1053/SF-HO
Osmar Danilo Castellanos Vásquez	Individual/Honduras	Partner of GATESA	Honduras	1/26/2009	1/26/2014	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1053/SF-HO
Joséfina Salazar Barrera	Individual/Honduras	Partner of GATESA	Honduras	1/26/2009	1/26/2014	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1053/SF-HO
Telma Iris David de Licona	Individual/Honduras	Legal representative, general manager and majority shareholder of GATESA	Honduras	1/26/2009	1/26/2014	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1053/SF-HO
Santa Berlioz Bendaña de Ocampo	Individual/Honduras	Project Chief of GATESA	Honduras	1/26/2009	1/26/2012	Fraudulent practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1053/SF-HO
Claudia Díaz Durán de Rocco	Individual/Guatemala		Guatemala	1/16/2009	1/16/2012	Fraudulent Practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 1221/OC-GU
Carlos Olivella	Individual/Colombia		Colombia	7/16/2008	7/16/2013	Bribery Practices, Art. 6 (d)(i) General Conditions of Technical Cooperation Agreement ATN/ME-7978-CO
Patricio Galindo Vargas	Individual/Bolivia		Bolivia	7/16/2008	7/16/2013	Fraudulent Practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 995/SF-BO
Amparo Navia de Camacho	Individual/Bolivia		Bolivia	7/16/2008	7/16/2013	Fraudulent Practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 995/SF-BO
Juan Jose Chacon Bozo	Individual/Bolivia		Bolivia	7/16/2008	7/16/2013	Fraudulent Practices, Art. 5.02 (c)(iii) General Conditions Contract Agreement 995/SF-BO
Camara Agropecuaria de La Paz (CALP)	Firm/Bolivia		Bolivia	4/28/2008	4/28/2012	Fraudulent Practices, Art. 6 (d) (iii) General Conditions of Technical Cooperation Agreement ATN/MH-7005-BO
Juan Carlos Zamorano Rodriguez	Individual/Bolivia		Bolivia	4/28/2008	4/28/2012	Fraudulent Practices, Art. 6 (d) (iii) General Conditions of Technical Cooperation Agreement ATN/MH-7005-BO
Hernan Tito Velasquez	Individual/Bolivia		Bolivia	4/28/2008	4/28/2012	Fraudulent Practices, Art. 6 (d) (iii) General Conditions of Technical Cooperation Agreement ATN/MH-7005-BO
Ivan Aguirre Peña	Individual/Bolivia		Bolivia	4/28/2008	4/28/2012	Fraudulent Practices, Art. 6 (d) (iii) General Conditions of Technical Cooperation Agreement ATN/MH-7005-BO
Oscar Alberto Díaz	Individual/Argentina	Principal Technical Advisor of the Programa de Eficiencia y Transparencia en las Compras y Contrataciones del Estado	Honduras	2/20/2008	2/20/2018	Corruptive practices. Art 5.02 (c)(i) General Conditions Contract Agreement 1059/SF-HO
Ana Noemí Santamaría	Individual/Argentina	Legal representative of Swiss Purchasing Company S.A. (Swip.Co)	Honduras	2/20/2008	2/20/2018	Corruptive practices. Art 5.02 (c)(i) General Conditions Contract Agreement 1059/SF-HO
Luis A. Ledezma	Individual/Bolivia		Bolivia	9/27/2007	9/27/2012	Fraudulent and collusive practices, Art 5.02 (c)(iii)(iv) General Conditions Contract Agreement 1050/SF-BO
Santiago Romero	Individual/Bolivia		Bolivia	9/27/2007	9/27/2012	Fraudulent and collusive practices, Art 5.02 (c)(iii)(iv) General Conditions Contract Agreement 1050/SF-BO
Anibal Aldana Ortega	Individual/Bolivia	Manager of Empresa Constructora ALINCO SRL	Bolivia	9/27/2007	9/27/2012	Collusive practices, Art 5.02 (c)(iv) General Conditions Contract Agreement 1050/SF-BO
Renan Alfredo Rodriguez	Individual/Bolivia	Manager of Empresa Constructora del SUR CONSUR SRL	Bolivia	9/27/2007	9/27/2012	Collusive practices, Art 5.02 (c)(iv) General Conditions Contract Agreement 1050/SF-BO
Empresa Constructora ALINCO SRL	Firm/Bolivia		Bolivia	9/27/2007	9/27/2012	Collusive practices, Art 5.02 (c)(iv) General Conditions Contract Agreement 1050/SF-BO
Empresa Constructora del SUR CONSUR SRL	Firm/Bolivia		Bolivia	9/27/2007	9/27/2012	Collusive practices, Art 5.02 (c)(iv) General Conditions Contract Agreement 1050/SF-BO
Manuel Herce	Individual/Spain	Manager of Enginyeria i Gestió d’Infraestructures S.L. (EGI)	Honduras	9/13/2007	9/13/2017	Corrupt practices, Art 5.02 (c)(iii) General Conditions and Art 2.01 Annex B Contract Agreement 1106/SF-HO
Enginyeria i Gestió d’Infraestructures S.L. (EGI)	Firm/Spain		Honduras	9/13/2007	9/13/2017	Corrupt practices, Art 5.02 (c)(iii) General Conditions and Art 2.01 Annex B Contract Agreement 1106/SF-HO
Miguel Rojas Alba	Individual/Bolivia	General Manager of CIACONST Srl	Bolivia	5/18/2007	5/18/2012	Fraudulent and corrupt practices, Art 5.02(c) (iii) General Conditions and Art. 2.01 Annex B Contract Agreement 1075/SF-BO
CIACONST S.R.L.	Firm/Bolivia		Bolivia	5/18/2007	5/18/2012	Fraudulent Practice, Art 5.02(c)(iii) General Conditions and Art. 2.01 Annex B Contract Agreement 1006/SF-BO
Gabriel Mejía Valdivieso	Individual/Bolivia	General Coordinator of the Congreso Digital project	Bolivia	3/23/2007	Permanent	Fraudulent and Collusive Practices, Art 6 (d)(iii) and Art 6 (d)(iV) General Conditions of Technical Cooperation Agreement ATN/SF- 8904-BO
Dolores Conde Villegas	Individual/Bolivia	Legal Representative of Desarrollo en Sistemas y Computación DELCOM	Bolivia	3/23/2007	Permanent	Fraudulent and Collusive Practices, Art 6 (d)(iii) and Art 6 (d)(iV) General Conditions of Technical Cooperation Agreement ATN/SF- 8904-BO
Desarrollo en Sistemas y Computación DELCOM	Firm/Bolivia		Bolivia	3/23/2007	Permanent	Fraudulent and Collusive Practices, Art 6 (d)(iii) and Art 6 (d)(iV) General Conditions of Technical Cooperation Agreement ATN/SF- 8904-BO
Juan Batista	Individual/Panamá	Director and Member of Educación Técnica Especializada S.A. EDUTEC	Panamá	3/23/2007	Permanent	Fraudulent Practice, Art 5.02(c)(iii) General Conditions and Art. 2.01 Annex B Contract Agreement 1403/OC-PN
Mirna Murillo de Vergara	Individual/Panamá	Owner and Secretary of Educación Técnica Especializada S.A. EDUTEC	Panamá	3/23/2007	Permanent	Fraudulent Practice, Art 5.02(c)(iii) General Conditions and Art. 2.01 Annex B Contract Agreement 1403/OC-PN
Adán Acosta Sánchez	Individual/Panamá	Owner, Director and Treasurer of Educación Técnica Especializada S.A. EDUTEC	Panamá	3/23/2007	Permanent	Fraudulent Practice, Art 5.02(c)(iii) General Conditions and Art. 2.01 Annex B Contract Agreement 1403/OC-PN
Geneva Alonso	Individual/Panamá	Vice President and Director of Educación Técnica Especializada S.A. EDUTEC	Panamá	3/23/2007	Permanent	Fraudulent Practice, Art 5.02(c)(iii) General Conditions and Art. 2.01 Annex B Contract Agreement 1403/OC-PN
Siria Rodríguez de Batista	Individual/Panamá	President, Director and Legal Representative of Educación Técnica Especializada S.A. EDUTEC	Panamá	3/23/2007	Permanent	Fraudulent Practice, Art 5.02(c)(iii) General Conditions and Art. 2.01 Annex B Contract Agreement 1403/OC-PN
José Gonzalez	Individual/Panamá	Employee of Educación Técnica Especializada S.A. EDUTEC	Panamá	3/23/2007	Permanent	Fraudulent Practice, Art 5.02(c)(iii) General Conditions and Art. 2.01 Annex B Contract Agreement 1403/OC-PN
Benigno Tomás Rodríguez	Individual/Panamá	Employee of Educación Técnica Especializada S.A. EDUTEC	Panamá	3/23/2007	Permanent	Fraudulent Practice, Art 5.02(c)(iii) General Conditions and Art. 2.01 Annex B Contract Agreement 1403/OC-PN
Reynaldo Anel Córdoba	Individual/Panamá	General Coordinator and Legal Representative of Educación Técnica Especializada S.A. EDUTEC	Panamá	3/23/2007	Permanent	Fraudulent Practice, Art 5.02(c)(iii) General Conditions and Art. 2.01 Annex B Contract Agreement 1403/OC-PN
Educación Técnica Especializada S.A. EDUTEC	Firm/Panamá		Panamá	3/23/2007	Permanent	Fraudulent Practice, Art 5.02(c)(iii) General Conditions and Art. 2.01 Annex B Contract Agreement 1403/OC-PN

Recent guilty plea in US demonstrates ongoing commitment to corruption prosecutions

2011-07-25T11:44:00.000-07:00

On May 19 2011 the US Department of Justice (DOJ) announced that Jorge Granados, former chief executive officer (CEO) of Miami-based telecommunications company Latin Node Inc (LatiNode), pleaded guilty to one count of conspiracy to violate the Foreign Corrupt Practices Act. On December 21 2010 the DOJ obtained a 19-count indictment against Granados and other LatiNode senior executives for their roles in a conspiracy to pay over $500,000 in bribes to Honduran government officials to retain a lucrative telecommunications contract. Granados's plea represents the latest example of the US government's ongoing and aggressive commitment to prosecute high-level business executives for Foreign Corrupt Practices Act violations.

Background

In December 2005 LatiNode was awarded a contract with Empresa Hondurena de Telecomunicaciones (Hondutel), the wholly state-owned telecommunications authority in Honduras. Almost immediately after winning the contract, LatiNode executives learned that LatiNode would need to bribe Hondutel employees in order to keep them from rescinding the contract. The indictment alleged that Granados and other LatiNode executives agreed to a secret deal to pay bribes to Hondutel officials, including the general manager, a Hondutel senior attorney and a minister of the Honduran government who became a representative on the Hondutel board of directors(1). The indictment also alleged that Granados actively participated in making concealed payments by laundering money through LatiNode subsidiaries in Guatemala and to accounts in Honduras controlled by government officials(2). On April 7 2009 LatiNode pleaded guilty to a one-count criminal violation of the Foreign Corrupt Practices Act (3). As part of the plea agreement, LatiNode agreed to pay a $2 million fine and cooperate with any further investigations by law enforcement agencies(4).

Three other former LatiNode senior executives – Manuel Salvoch, chief financial officer (CFO), Juan Pablo Vasquez, chief commercial officer, and Manuel Caceres, vice president for business development – have already pleaded guilty to the Foreign Corrupt Practices Act violations this year for their involvement in the Hondutel bribery scheme. Granados is scheduled for sentencing on August 22 2011 and faces up to five years in prison and a fine of $250,000 or more(5).

Comment

Granados's plea agreement reflects the DOJ's aggressive stance on holding high-level business executives accountable for the Foreign Corrupt Practices Act violations. During a Senate committee hearing last November, Senator Arlen Specter had expressed concern regarding the lack of significant prosecutions of individuals who are responsible for the Foreign Corrupt Practices Act violations, notwithstanding the penalties against companies and shareholders for such violations(6).

Recent cases suggest that, in fact, high-level business executives are being held accountable for Foreign Corrupt Practices Act violations. For example, on January 24 2011 the former CEO and CFO of Innospec Inc, Paul W Jennings, agreed to settle the Foreign Corrupt Practices Act charges with the Securities and Exchange Commission for approving improper payments to Iraqi and Indonesian government officials(7). On May 10 2011 a federal jury in California found Lindsey Manufacturing Co president, Keith Lindsey, its CFO, Steve Lee, and an intermediary guilty on all counts in a criminal prosecution for the Foreign Corrupt Practices Act violations(8). As Assistant Attorney General Lanny A Breuer of the Criminal Division of the DOJ remarked about the Granados case: "[f]oreign bribery undermines competition in the marketplace, and weakens democratic institutions. CEOs and other corporate executives should know that now, more than ever, violating the Foreign Corrupt Practices Act will lead to criminal prosecution"(9).

For further information on this topic please contact Richard Craig Smith, John Kelly, Fatema Merchant orRabeha Kamaluddin at Fulbright & Jaworski LLP by telephone (+1 202 662 0200), fax (+1 202 662 4643) or email (rcsmith@fulbright.com, jkelly@fulbright.com, fmerchant@fulbright.com,rkamaluddin@fulbright.com)

Endnotes

(1) Criminal Indictment, United States v Latin Node Inc, Case 10-20881, available athttp://www.justice.gov/criminal/fraud/fcpa/cases/granados-jorge/12-21-10granados-indict.pdf

(2) Id at 22-23

(3) In early 2007, Florida-based eLandia International Inc (eLandia) acquired LatiNode. Following the acquisition, eLandia discovered the bribes and self-disclosed the violations to the DOJ and Securities and Exchange Commission.

(4) Criminal Plea Agreement, United States v Latin Node Inc, Case 09-20239, available athttp://www.justice.gov/criminal/fraud/fcpa/cases/litton-applied/04-03-09latinnode-plea-agree.pdf

(5) Specifically, Granados faces a fine of the greater of $250,000, or twice the gross amount of any pecuniary gain or loss that any person derived or sustained from the offence. See Criminal Plea Agreement, 10-CR-20881 (SD Fla May 19 2011)

(6) See "Granados and Caceres Indictments Latest in FCPA Individual Prosecutions," Fulbright & Jaworski LLP Briefing, December 22 2010

(7) See Securities and Exchange Commission Press Release, "SEC Charges Former CEO of Innospec for Role in Bribery Scheme", available at http://www.sec.gov/news/press/2011/2011-21.htm

(8) United States v Noriega et al, 2:10-CR-01031 (CD Cal May 10 2011)

(9) DOJ Press Release, "Former CEO of US Telecommunications Company Pleads Guilty to Foreign Bribery Conspiracy" (May 19 2011), available at http://www.justice.gov/opa/pr/2011/May/11-crm-644.html

Contributed by Fulbright & Jaworski LLP

New Anti-Corruption Laws passed in Mexico - Spotlight on Contractors and Concession Holders

2011-07-25T11:37:00.000-07:00

Introduction

The Senate has passed the Federal Anti-corruption Law regarding Government Contracts. It is expected to be passed by the lower house in the course of 2011, probably before the end of the congressional term.

Mexico is a member state of the United Nations Convention against Corruption, the Inter-American Convention against Corruption and the Organisation for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. When the law comes into force, it will fill one of the main legislative gaps in the government's fight against corruption, which focuses specifically on private contractors that do business with the government. This anti-corruption drive will also affect business undertaken with state institutions (eg, Pemex and the Comisión Federal de Electricidad (CFE), the government-owned oil and power companies), and with the agencies in charge of awarding and handling infrastructure concessions (eg, the Ministry of Communications). The purpose of the law is to penalise individuals and companies, from Mexico or abroad, that engage in unethical behaviour in the context of government contracting in Mexico - the law refers to such actions as 'irregular activities'. Public servants are already subject to the Federal Law on the Administrative Responsibilities of Public Servants, but this statute is enforceable only in respect of wrongdoing on the government side, whereas OECD studies and international practice show that corrupt practices are more likely to originate with a contractor or concession holder. In seeking to be more active in regulating and overseeing contractors, Mexico is following an international trend.

Key features

The Anti-corruption Law applies only at federal level, but at which nearly 70% of the federal budget is spent through contracts and concessions. It covers all forms of contract, agreement and concession; it even extends to the granting of permits, from the design, bid preparation, tendering and award stages to their execution and completion. It explicitly applies to Pemex and CFE contracts, and to infrastructure projects. Like most foreign legislation implemented by OECD countries, and following a trend that was started by the US Foreign Corrupt Practices Act, the law also applies to acts beyond the Mexican territory, covering irregular activities by national companies or individuals in international commercial transactions where a foreign official is involved.

The federal agency in charge of enforcing the law is the Bureau of the Federal Comptroller, along with its internal comptroller departments which are integrated into most government agencies and public entities. The bureau is also in charge of enforcing the Law on the Administrative Responsibilities of Public Servants and supervising budget spending at federal level.

The Anti-corruption Law empowers the bureau to punish persons and companies involved in irregular activity. This includes intermediaries, agents and consultants, but also extends to the beneficiaries of irregular activities - which will typically be Mexican-domiciled companies and their shareholders, parents and affiliates, whether foreign or Mexican.

The law identifies eight forms of irregular activity. As well as bribery and peddling influence, these include a catch-all provision that penalises any action that involves obtaining - or has the purpose or effect of obtaining - an undue benefit or advantage in a government contract. 'Bribery' is broadly defined to include promises, undue influence or the giving of money or anything of value to a private contractor that is involved in the design, preparation or execution of a bid or public contract. Unlike anti-bribery laws in some other jurisdictions, the law makes no exception for facilitation or similar payments made to accelerate the receipt of a service or contract that would have been rightfully assigned or granted in any case.

The law provides for large fines, which may be increased in proportion to the benefit gained. It also allows the authorities to blacklist individuals and companies, debarring them from participation in federal government contracts or concessions for up to 10 years. Fines imposed by the bureau will be treated as tax credits and may be collected pursuant to tax laws and regulations. The bureau's penalties are independent and additional to any criminal penalties which may be imposed following prosecution by the Attorney General's Office. The law provides for a 10-year statute of limitations.

The law includes a leniency programme whereby individuals and companies involved in irregular activity may plead guilty to involvement and assist the bureau in conducting its investigation, thereby qualifying for a 50% to 70% reduction in fines.

Anyone has standing to file a claim under the law. In practice, many claims are likely to be filed by the agency or public entity in charge of the government contract or concession in question. However, the law allows claims to be filed online, anonymously, or through the filing of a claim submitted under oath with respect to knowledge of the facts, the indication of evidence and information about the responsible parties - such a claim can be brought only by a private contractor, not by the government. The bureau is mandated to maintain claimant confidentiality. This factor is expected to encourage competitors to file corruption claims if there is reason to believe that a case for corruption may exist, although concerns remain about the submission of false information.

A public servant must make known a fact or activity that violates the law; otherwise, he or she is subject to penalties under the Federal Law on the Administrative Responsibilities of Public Servants and is liable under the Federal Criminal Code.

The bureau may start an investigation on its own initiative or on the basis of information provided in a claim. The law confers broad powers to request production of documents and information not only from government agencies or state entities, but also from third parties. For the purposes of its investigation, the bureau may access information that is classified or reserved under the Freedom of Public Information Laws and Regulations.

If, on the basis of an investigation, the bureau can show probable cause of a violation, it must begin administrative penalty proceedings. Once notified, the defendants have 15 business days to file a plea in response. Thereafter, the bureau must allow the production and admission of evidence by the defendants under the terms of the Federal Rules of Civil Procedure. Thereafter, the defendants have five business days to submit closing arguments. The bureau will then have 10 business days to issue its resolution.

Comment

In future, the law is expected to open up a broad area of practice in respect of claims and investigations. The coming months and years are likely to see the development of significant precedents and further legislation.

Contributed by López Velarde, Heftye y Soria

Jury convicts first corporate Foreign Corrupt Practices Act defendant

2011-05-23T10:33:00.000-07:00

Comment by Fulbright & Jaworski LLP

On May 10 2011 Lindsey Manufacturing Company, two of its executives and a Mexican intermediary were convicted by a federal jury on all counts for their alleged respective roles in a bribery scheme involving Mexican government officials. After a five-week trial, the jury took just one day to return the guilty verdicts. Executives Keith E Lindsey and Steve K Lee were each convicted of one count of conspiracy to violate the Foreign Corrupt Practices Act and five counts of Foreign Corrupt Practices Act violations. Angela Aguilar, the Mexican intermediary, was convicted of one count of money laundering conspiracy.

Facts

Lindsey Manufacturing hired Grupo Internacional de Asesores SA to act as its Mexican sales representative and to obtain contracts for Lindsey from Mexico's state-owned utility company, Comisión Federal de Electricidad (CFE). Grupo received a percentage of Lindsey Manufacturing's revenue from CFE contracts. Aguilar and her husband, Enrique Aguilar,(1) were directors of Grupo.

At trial, the Department of Justice presented evidence that from approximately February 2002 until March 2009, Lindsey Manufacturing and Lindsey, Lee and others orchestrated a bribery scheme whereby Mr Aguilar was paid a 30% commission on Lindsey Manufacturing's sales to CFE, a significantly higher commission than that given to previous Lindsey Manufacturing sales representatives. According to the department's evidence, Lindsey and Lee understood that all or part of this commission amount would be used to bribe CFE officials in exchange for contract awards. According to the evidence presented at trial, Lindsey Manufacturing then increased the price of the goods and services sold to CFE by 30% to ensure that CFE, rather than Lindsey Manufacturing, absorbed the cost of the bribes.

The Department of Justice also presented evidence that:

Grupo submitted fraudulent invoices to Lindsey Manufacturing for the commission amount;
Lindsey and Lee then wired the money requested into Grupo's account, knowing that the invoices were fraudulent and that at least some of the funds were being used as bribes;
Lindsey and Lee learned that Mr Aguilar had a corrupt relationship with a top CFE official;
Mrs Aguilar authorised money in the Grupo account to be used to buy a CFE official a $297,500 Ferrari Spyder and a $1.8 million yacht, in addition to paying more than $170,000 worth of the official's credit card bills; and
Mrs Aguilar also authorised the transfer of $500,000 from Grupo's account to relatives of another CFE official.

Comment

The convicted defendants face a penalty of up to five years in prison and a fine of the greater of $250,000 or twice the value gained or lost on the Foreign Corrupt Practices Act conspiracy charge. Each of the five Foreign Corrupt Practices Act counts carries a penalty of up to five years in prison and a fine of the greater of $100,000 or twice the value gained or lost. The money laundering conspiracy count carries a penalty of up to 20 years in prison and a fine of the greater of $500,000 or twice the value of the property involved in the transaction. In addition, the government is seeking forfeiture against all of the defendants. Sentencing for Lindsey Manufacturing and Lindsey and Lee is scheduled for September 16 2011, while sentencing for Mrs Aguilar is scheduled for August 12 2011.

Before trial, the defendants challenged the Department of Justice's definition of 'foreign official' under the Foreign Corrupt Practices Act; however, the court upheld the department's definition, finding that CFE was an "instrumentality" of the Mexican government.(2) Therefore, the CFE officer who allegedly accepted the bribes was a "foreign official" for Foreign Corrupt Practices Act purposes.

In its press release regarding the convictions, the Department of Justice quoted Assistant Attorney General Lanny Breuer as saying:

"Lindsey Manufacturing is the first company to be tried and convicted on Foreign Corrupt Practices Act violations, but it will not be the last... As this prosecution shows, we are fiercely committed to bringing to justice all the players in these bribery schemes – the executives who conceive of the criminal plans, the people they use to pay the bribes, and the companies that knowingly allow these schemes to flourish."(3)

Several points from the verdicts are noteworthy:

The Department of Justice will continue to pursue Foreign Corrupt Practices Act enforcement aggressively against companies and individuals – and currently plans to do so under a broad definition of 'foreign official'.(4)
Coupled with the department's aggressive pursuit of Foreign Corrupt Practices Act enforcement, the speed with which the jury convicted the defendants is also noteworthy.
Although historically there have been relatively few enforcement actions leading to trial, this case confirms that the department can prevail at trial against both companies and individuals.
Multiple theories of potential liability will be pursued by the enforcement authorities in Foreign Corrupt Practices Act enforcement actions; here, violation of the Foreign Corrupt Practices Act, conspiracy to violate the Foreign Corrupt Practices Act and conspiracy to money launder were theories on which the government prevailed.
The department acknowledged in its press release the assistance that it received from the Mexican authorities during the investigation, marking another continuing enforcement trend of increased international enforcement cooperation.

Given the continuing upswing in aggressive enforcement, companies subject to the Foreign Corrupt Practices Act must ensure that they and their employees, agents, consultants or other third-party representatives take steps to comply with the Foreign Corrupt Practices Act.(5) Those steps include:

assessing the company's international business reach and environment and establishing a robust risk-based compliance programme;
conducting due diligence on third parties and subsidiaries;
training company personnel and third parties to understand anti-corruption obligations and identify red flags; and
ensuring transparency and accuracy when recording financial transactions.

As US Attorney André Birotte remarked in connection with the convictions, the Department of Justice:

"remains committed to prosecuting violations of the Foreign Corrupt Practices Act to ensure that the payment of bribes can no longer be viewed simply as the cost of doing business in a foreign nation. Bribery, wherever it occurs, will carry the potential cost of criminal prosecution, hefty fines and prison terms."(6)

For further information on this topic please contact Marsha Z Gerber, Richard Craig Smith or Paul Simonat Fulbright & Jaworski LLP by telephone (+1 202 662 0200), fax (+1 202 662 4643) or email (mgerber@fulbright.com, rcsmith@fulbright.com or psimon@fulbright.com).

Endnotes

(1) Mr Aguilar has also been charged with conspiracy to violate the Foreign Corrupt Practices Act, violations of the Foreign Corrupt Practices Act and money laundering. Mr Aguilar remains a fugitive and is presumed innocent unless and until proven guilty.

(2) For an analysis of the court's ruling on the definition of 'foreign official' please see "California court retains government's broad interpretation of 'foreign official'".

(3) Department of Justice press release, May 10 2011, "California Company, Its Two Executives and Intermediary Convicted by Federal Jury in Los Angeles on All Counts for Their Involvement in Scheme to Bribe Officials at State-Owned Electrical Utility in Mexico," available atwww.justice.gov/opa/pr/2011/May/11-crm-596.html

(4) The definition of 'foreign official' under the Foreign Corrupt Practices Act has also been challenged in two other current cases – see US v O'Shea (No 4:09-cr-00629 (SD Tex)) and US v Carson (No 8:09-cr-00077 (CD Ca)). Those courts have yet to rule on the pending motions.

(5) Companies with operations providing a nexus to the United Kingdom must equally ensure compliance with the UK Bribery Act of 2010, which will come into force on July 1 2011.

(6) Supra note 3.

Pondering section 27 Integrity in Public Life Act 2000 (as amended) of Trinidad and Tobago

2011-05-23T05:48:00.000-07:00

The Hon. Prime Minister, Kamla Persad Bissessar

From the first time I heard that the Hon. PM's "free lodging" at the Gopaul's was being interpreted as a "fee, gift or personal benefit" under section 27 (1) of the Integrity in Public Life Act 2000 as amended, I intuitively thought it an uncomfortable interpretation but I could not put my finger on exactly why it was so. It was certainly a benefit received and so I understand the readiness to conclude that it must be covered under the section dealing with the prohibition and declaration of gifts by public officials. I held my tongue on the topic ( even though as most of you know I am most inclined to comment on topics of this sort) and pondered a little. Why was I uncomfortable with this interpretation? Why did it seem like forcing a square peg into a round hole to me?

Let us look at section 27 closely :

"27. (1) A person to whom this Part applies shall not accept a fee, gift or personal benefit, except compensation authorized by law, that is connected directly or indirectly with the performance of the duties of his office.

(2) Subsection (1) does not apply to a gift or personal benefit that is received as an incident of the protocol or social obligations that normally accompany the responsibilities of office.

(3) Where a gift or personal benefit referred to in subsection (2) exceeds five thousand dollars in value or where the total value received directly or indirectly from one source in any twelve-month period exceeds five thousand dollars, a person in public life shall file with his declaration, a statement indicating the nature of the gift or benefit, its source and the circumstances under which it was given or accepted.

(4) For the purposes of this section, the amount of a gift comprising property, other than money, shall be deemed to be an amount equal to the value of the property.”

If we were to look at 27 it would appear that there is not there created an absolute bar to the receipt of any gift whatsoever. Further from a consideration of the section in its entirety it is clear that there are distinctions made between categories of gifts etc. Let us break it down. From my reading of it there are at least four potential categories of gifts :

Gift Category 1

Defined by section 27 (1) - those fees, gifts, personal benefits, not authorized by law, that are connected directly or indirectly with the performance of one's duties of office. -Prohibited

Gift Category 2

Defined by section 27 (2) - those gifts/benefits received as an incident of the protocol or social obligations that normally accompany the responsibilities of office (under the value of 5000TT) - Permitted

Gift Category 3

Defined by section 27 (3) - those gifts/benefits received as an incident of the protocol or social obligations that normally accompany the responsibilities of office (over the value of 5000TT) - To be declared

Gift Category 4

Not defined by the section but nonetheless must exist - those fees, gifts, personal benefits received by public officials which are NOT connected directly or indirectly with the performance of one' duties of office. - Not Covered by the Act

It is of course category 4 which causes the most concern but given the manner in which the section 27 is drafted - it must exist. Section 27 (1) breaks down the elements which one must find in the type of fee, gift or benefit which is prohibited eg.

1. Must be a Fee, gift or personal benefit

2. Must not be authorized by the law (wages, salaries, benefits or perks of office)

3. Must be connected directly or indirectly to the performance of one's duties of office.

The Gift of Free Lodging

In the instant situation relating to the benefit of "free lodging", whilst elements 1 and 2 are made out, it is questionable whether element 3 is made out. There are two sub elements to 3 which are (a) must be connected directly or indirectly and (b) to the performance of one's duties of office.

Taking the latter sub element first, the reference in s.27(1) (as amended) to “the duties of office” would seem to be a reference to public duties, ie duties which are an incident of the holding of a public office. Section 23 provides that Part IV of the Act applies to “a person in public life and to all persons exercising public functions”. Such persons are defined in section 2 and include all persons holding office under the Public Service. “Public functions” is a term not defined in the Act but “persons exercising public functions” is defined in s.2 to include, inter alia, the Judicial, Police and Teaching services. Sections 24 to 27 are concerned with the use and misuse of office. This must, ex hypothesi, mean ‘public’ office. Similarly, the reference in s.24(1) to the performance of functions must be a reference to ‘public’ functions.

S.24(1)(a) makes express reference to the exercise of “public duty”. The term is not defined. However, it must necessarily encompass duties which are an incident of the public office and, possibly, which are owed to the public. A public duty may, in principle, be distinct from a ‘private’ duty, which may, eg, include those duties arising by way of contract of employment.

Accordingly, holding a public office may, in principle, give rise to both public and private duties. So a teacher’s duties might include, eg, one to mark exam papers impartially which could properly be characterized as a public duty; and a duty to work the hours stipulated in her contract, which is perhaps more readily categorized as a private duty.

If this public/private distinction is in principle valid, then one can interpret s.27(1) as being concerned with matters “connected directly or indirectly with the performance of the [public] duties of his office”.

Leaving aside, for one moment, the meaning of “connected directly or indirectly”, one can interpret s.27(1) as, therefore, being concerned with the relationship between the acceptance of a fee, gift or personal benefit and the performance of a public duty which is an incident of the holding of a public office.

Considering the first sub element (a) “Connected” is defined in Collins English Dictionary as meaning “joined or linked together”. Using this definition, the term is suggestive of there being a link or relationship between said acceptance and said performance. That is to say that the acceptance of the benefit (and presumably also its offering) is referable to the performance of the public duty, or is linked to the performance of the public duty.

It can be seen that s.27 distinguishes between benefits connected directly or indirectly with the performance of the duties of office (s.27(1)) and benefits “received as an incident of the protocol or social obligations that normally accompany the responsibilities of office” (s.27(2)). As explained above, this is not an exhaustive characterization of all benefits that a holder of public office could receive. Thus, by way of example, a birthday present from a family member would not fall under either category of benefit identified in s.27(1) or (2). The gift does not fall within s.27(1) because it is not connected with the performance of the duties of office. It does not fall within s.27(2) because it was not received as an incident of the protocol or social obligations that normally accompany the responsibilities of office, and therefore would not fall within s.27(3) either, even if its value exceeded TT5,000. Let us refer to this type of gift/benefit as the Category 4 gift outlined above.

Similarly, the gift of free lodging from a friend without any evidence of a "connection directly or indirectly" with the performance of a public duty (for example the public duty to award a contract fairly and impartially) would not therefore appear to infringe section 27 (1). It would also not infringe section 27 (2) as it is not a gift given as an incident of protocol or social obligation accompanying the office and neither is it declarable under section 27 (3).

On the above interpretation of the Act, it follows that, the mere fact that a fee, gift or benefit may be convenient to the performance of a public duty does not by itself establish the connectivity required by section 27(1).

A Note on the Integrity in Public Life Act

Ok so I understand the discomfort with this.. it may be readily accepted that the Act is not the best example of parliamentary draftsmanship. Party financiers who are friends can give gifts of value and once no evidence can be adduced showing a connection with the performance of a public duty there is no infringement. I am uncertain whether this was the intention of the framers. Perhaps a simpler expression of the rules would be

1. Create an absolute bar on all gifts received in connection with the performance of duties of office (as is done by section 27 (1) as amended).

2. However, require full disclosure of ALL gifts received over the value of 5000TT so that in the event of an allegation being made there should be appropriate records to assist with the investigation. Our section 27 (3) requires only the declaration of gifts over 5000TT which are received as an incident of protocol or social obligation relating to the public office, thereby creating a fairly large loophole relative to Category 4 gifts.

A Note on the NP Procurement Process

All of this to say, I am not defending the NP procurement process nor am I saying that the Hon. PM did or did not interfere and or influence the process. All I am saying, is

(1) the mere fact of the acceptance of the gift/benefit of free lodging by the Hon. PM does not of itself establish a breach of section 27 (1) and

(2) the award by an SOE of a contract to the donor of the said gift/benefit of free lodging, is not, without more, sufficient to support an allegation of impropriety.

This notwithstanding, there may be evidence which is adduced later on pointing to unfairness of procedure, breaches of duties to award the contract as tendered, to disqualify non compliant bids etc, and there may even be evidence elicited relating to political interference and influence over the award. In such circumstances, it may be that the Hon.PM or other public officials may have a case to answer.

New Anti-Corruption Compliance Checklist issued by TI Canada

2011-05-10T06:47:00.001-07:00

Transparency International Canada (TI-Canada) today announced the launch of its Anti-Corruption Compliance Checklist (TI-Canada ACC).

In line with Canada’s Corruption of Foreign Public Officials Act (CFPOA), the TI-Canada ACC is a critical tool for those Canadian corporations seeking to significantly enhance their risk management processes.

Implementation of the TI-Canada ACC will enable a Canadian corporation of any size to conduct itself in international markets in compliance with ethical and legal obligations to avoid corruption and operate with transparency, accountability and integrity.

As the Canadian chapter of TI, the global coalition leading the fight against corruption, TI-Canada’s mandate is to promote methods to eradicate corruption in Canada, and via education to help Canadian companies address and avoid corruption in their international business activities.

The recent revelation from the RCMP Sensitive Investigations and International Anti-Corruption Unit that 23 CFPOA investigations are underway means that, “Canadian companies can no longer hide behind the world’s perception that business is done here in a completely ethical manner. Companies must learn to operate internationally without paying bribes,” according to James M. Klotz, Chair and President of TI-Canada. The TI-Canada ACC, available for free download from www.transparency.ca, is a solid tool for Canadian corporations faced with the challenges of operating ethically in today’s global environment.

New Anti-Corruption Era in Egypt

2011-04-19T06:35:00.000-07:00

Transparency International (TI), the global anti-corruption organisation, hosted a two-day workshop in Cairo to debate the reforms necessary to make Egyptian institutions more resilient to corruption and more accountable to the public.

Entitled “Towards a new integrity system in Egypt”, the workshop brought together more than 75 members of government, media, academics, judiciary and civil society to agree on the first steps to making Egyptian institutions strong and independent so that they can enforce anti-corruption laws and uphold freedom of expression.

These discussions can act as a starting point for a new anti-corruption framework, with measures that ensure all actors in the Egyptian state – including leaders, public officials and security forces - act with integrity.
“In this meeting people inside and outside worked together driven by a common determination to create a truly effective and comprehensive anti-corruption system. There is a very clear mood that we cannot allow rules and institutions to be side-stepped by those in power,” said Omnia Hussein, In-Country Programme Coordinator for Transparency International in Egypt. “Egypt must have a state-of-the-art system of checks and balances so that there are no longer exceptions to anti-corruption rules.”

Among the measures called for to improve accountability and transparency are:

New laws that guarantee that all public officials are accountable, with no exceptions.

Ensure the total independence of anti-corruption bodies, and expand their remit to include relations between the public and private sectors such as public procurement. Their reports must be made publicly available.

Strong laws on freedom of information and whistle-blower protection. Accountability rules must apply to all areas of government, without exemptions for areas like defence or justice

Financial institutions must exercise constant scrutiny of any clients who are public officials

Creation of a national body responsible for a comprehensive national strategy for combating corruption

The creation of the role of ombudsman to investigate citizens’ complaints.

Learning from the past

“Egypt is still suffering from corruption. The fall of one leader will not cure the weakness of institutions that until now have not been able to consistently enforce anti-corruption rules,” said Omnia Hussein. “This is where civil society can make a difference if given space to operate freely, in a way that was not allowed in the past. The fact that members of government and judiciary are openly discussing the future transparency of state institutions is a good start for the new Egypt.”

Last year, Transparency International published an analysis of Egyptian state institutions and their contribution to accountability and integrity. It found that even where mechanisms for transparency and accountability did exist, they were undermined by lack of independence and political will to fight corruption. It also highlighted lack of space for civil society and protection for whistleblowers.

Egypt scores 3.1 on Transparency International’s Corruption Perceptions Index, a scale which goes from 0 (highly corrupt) to 10 (very clean).

Transparency International is the global civil society organisation leading the fight against corruption, with chapters in 94 countries around the world, including Morocco, Lebanon and Palestine.

Media Contact
Deborah Wise Unger
Tel: +49 30 34 38 20 666
Email: press@transparency.org

US courts interpret "Foreign Official" to include employees of State-Owned Enterprises

2011-04-19T01:00:00.000-07:00

Below there is a case note prepared by the US law firm of Fulbright & Jaworski on the landmark Lindsey Manufacturing decision in interpreting bribery of foreign officials legislation in the US (the Foreign Corrupt Practices Act -FCPA 1977). However, it's importance will be instructive in other jurisdictions which have also passed counterpart legislation eg the Canadian Corruption of Foreign Public Officials Act 1999 and the UK Bribery Act 2010. These legislative frameworks emanate principally from the obligations of member states under the OECD Anti Bribery Convention 1997. The OECD Anti Bribery Convention is the first global anti-corruption convention attempting to deal with supply side (cross border) bribery. Signed by 30 OECD countries in December 1997 this convention entered into force in February 1999 and there are now 38 signatories. The Convention permits countries to move in a co-ordinated manner to adopt national legislation making it a crime to bribe foreign public officials. It provides a broad definition of bribery, requiring countries to impose dissuasive sanctions and committing them to providing mutual legal assistance. Though the US FCPA pre dates the Convention, the provisions were incorporated under the Act in 1998. In the US the FCPA complements other legislation in this area such as the USA Sarbanes Oxley Act which also requires firms to operate effective systems of control and come clean about instances of fraud. For the Risk Management and Compliance functions of financial firms there is no getting away from these pieces of legislation indeed compliance with one assists the other.

California court retains government's broad interpretation of 'foreign official'

Contributed by Fulbright & Jaworski LLP

April 18 2011

On April 1 2011 US District Judge Howard Matz issued an opinion from the bench in one of three pending cases challenging the US Department of Justice's broad interpretation of the term 'foreign official' under the US Foreign Corrupt Practices Act. The court in US v Enrique(1) (the case has informally been referred to as Lindsey Manufacturing in reference to one of the three defendants) is the first of the three to rule on this seminal issue. The court denied the defendants' motion to dismiss, concluding that employees of state-owned enterprises are foreign officials for purposes of the act. The precise issue before the court was whether officials of Mexico's state-owned utility company, Mexican Comisión Federal de Electricidad (CFE), were foreign officials under the act.

The Foreign Corrupt Practices Act defines a 'foreign official' as:

"any officer or employee of a foreign government or any department, agency, or instrumentality thereof, or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency, or instrumentality, or for or on behalf of any such public international organization."(2)

However, the act does not define 'department', 'agency' or 'instrumentality'. The Department of Justice and other US enforcement authorities have utilised this apparent lack of clarity to construe liberally the statutory definition and apply it to interactions with employees of commercial state-owned or controlled enterprises. The Department of Justice's interpretation has previously been challenged by defendants in two other recent cases.(3) However, in both cases the court dismissed the defences' challenges with either no substantive analysis of the issue or very little useful analysis. Lindsey Manufacturing marks the first time that the issue appears to have been squarely addressed by the court.

The defendants in Lindsey Manufacturing, as well as the defendants in two other pending cases - one in another California federal district court and the other in the Southern District of Texas(4) - challenged the Department of Justice's broad interpretation of 'foreign official' in pre-trial motions to dismiss. The motions were extensively briefed in all three cases, but Lindsey Manufacturing is the first to be decided. The most elaborately briefed motion is still before the court in the Carson case pending in the Southern District of California. All three motions were filed within the last three months.

The Lindsey Manufacturing defendants argued that:

the plain meaning of the term 'instrumentality' excludes state-owned enterprises;
the legislative history of the Foreign Corrupt Practices Act indicates that Congress did not intend to include employees of state-owned enterprises as foreign officials; and
if employees of state-owned enterprises are foreign officials, then the statute is unconstitutionally vague.

The defendants in Carson and O'Shea have made similar arguments.

Reliable media sources reported that Matz stated in his oral ruling from the bench that the defendants' attempt to argue for a more limited definition of the term was "improper, unfounded and incorrect".(5) The judge is expected to issue a written order confirming his oral ruling.

Following the hearing, Lindsey Manufacturing's defence counsel conveyed that the judge's decision was based on the nature of CFE and the "essential governmental function" that CFE performs.(6) Defence counsel further stated that the essential governmental function "appeared to be more important to his ruling than the legislative history" of the Foreign Corrupt Practices Act, and that "it was clear [the judge] felt [CFE] functioned as an agency or department of the Mexican government", and "relied heavily" on the Mexican Constitution and Mexican law.(7)

The Lindsey Manufacturing ruling is significant as it represents a victory for the Department of Justice that - at least for the time being - will likely strengthen and embolden the government's efforts to bring enforcement actions against companies and individuals based on its expansive interpretation of the term 'foreign official'. Additionally, while the extent to which the ruling will affect the Carson and O'Shea courts' decisions is uncertain, the decision will likely be weighed as both courts consider whether to narrow the current government view of who is a 'foreign official' for purposes of Foreign Corrupt Practices Act enforcement under the respective facts of each of those cases.

The next two decisions will be highly anticipated. Certainty regarding who will be considered a foreign official under the Foreign Corrupt Practices Act, and thus who should be considered a potential recipient of an improper payment under the act, is critical as companies determine how best to formulate an effective compliance programme in the current enforcement environment. Definitive rulings from the three courts in the pending cases will impact on enforcement and corporate compliance initiatives alike.

For further information on this topic please contact Richard Craig Smith, Marsha Z Gerber, Mary Beth Balhoff or Kimberly Sullivan Walker at Fulbright & Jaworski LLP by telephone (+1 202 662 0200), fax (+1 202 662 4643) or email (rcsmith@fulbright.com, mgerber@fulbright.com, mbalhoff@fulbright.com orkwalker@fulbright.com).

Endnotes

(1) No 2:10-cr-01031-AHM (CD Ca).

(2) 15 USC §§ 78dd-1(f)(1)(A), 78dd-2(h)(2)(A), 78dd-3(f)(2)(A).

(3) See US v Nguyen, No 2:08-CR-522 (ED Pa); US v Esquenazi, 1:09-cr-21010 (SD Fla).

(4) See US v Carson, No 08:09-00077-JVS (SD Ca); US v O'Shea, No 4:09-cr-00629 (SD Tex).

(5) See Steven Mikulan and Aruna Viswanatha, "Judge Upholds DOJ Definition of 'Foreign Official'", Main Justice: Just Anti-Corruption (April 1 2011).

(6) Id.

(7) Id.

Long Awaited Guidance on UK Bribery Act 2010 Issued Amidst Heavy Criticism

2011-04-01T13:53:00.000-07:00

Amid much criticism the Government of UK has issued the long awaited Guidance Procedures to support the implementation of the UK Bribery Act which was passed on 9th April 2010. The Government says the Act aims to ensure the UK can clampdown on corruption without being burdensome to business. For example, ensuring anti-bribery procedures are proportionateto the bribery risks firms face and to the nature, scale and complexity of its activities. The Guidance issued on 30th March 2011 underscores six (6) principles which corporations seeking to avoid liability should follow.

The six key principles are:

Proportionate procedures

A commercial organisation’s procedures to prevent bribery by persons associated with it are proportionate to the bribery risks it faces and to the nature, scale and complexity of the commercial organisation’s activities. They are also clear, practical, accessible, effectively implemented and enforced.

Top-level commitment

The top-level management of a commercial organisation (be it a board of directors, the owners or any other equivalent body or person) are committed to preventing bribery by persons associated with it. They foster a culture within the organisation in which bribery is never acceptable.

Risk assessment

The commercial organisation assesses the nature and extent of its exposure to potential external and internal risks of bribery on its behalf by persons associated with it. The assessment is periodic, informed and documented.

Due diligence

The commercial organisation applies due diligence procedures, taking a proportionate and risk based approach, in respect of persons who perform or will perform services for or on behalf of the organisation, in order to mitigate identified bribery risks.

Communication (including training)

The commercial organisation seeks to ensure that its bribery prevention policies and procedures are embedded and understood throughout the organisation through internal and external communication, including training, that is proportionate to the risks it faces.

Monitoring and review

The commercial organisation monitors and reviews procedures designed to prevent bribery by persons associated with it and makes improvements where necessary.

Justice secretary Kenneth Clarke says: “I have listened carefully to business representatives to ensure the Bribery Act is implemented fully and in a workable, common sense way – this is particularly important for small firms that have limited resources. I hope this guidance shows that combating the risks of bribery is largely about common sense, not burdensome procedures.”

The above notwithstanding, the Guidance has already come under some severe criticism. Transparency International UK calls the Guidance "deplorable" and insists it will weaken enforcement efforts under the Act. Chandrashekhar Krishnan, Executive Director of Transparency International UK explains:

"The Bribery Act, as passed by the last Parliament, is one of the best anti-bribery laws in the world. But the Guidance will achieve exactly the opposite of what is claimed for it. Parts of it read more like a guide on how to evade the Act, than how to develop company procedures that will uphold it.

‘It is deplorable that changes made to the draft Guidance since late last year, and now enshrined in the published version, depart from international good practice in several areas. The Ministry of Justice has exceeded its brief with this final Guidance which undermines the Act and will limit its effectiveness. There is now a significant risk that bribery will go unpunished."

Some of the identified loopholes include:

A non-UK company listed on the London Stock Exchange (LSE) is not automatically caught by the Bribery Act. This means that a) it could use capital raised in the UK to pay bribes overseas, and b) a UK-based company that loses a contract to a non-UK company listed on the LSE which paid a bribe to win the contract, may have no recourse in the UK courts. [Guidance para 36]
A non-UK parent company A with a large UK subsidiary B could pay bribes through subsidiary C based in a third country. If UK subsidiary B did not directly benefit from the bribes, the non-UK parent company A would not be caught by the Bribery Act – even if its other subsidiary C was competing unfairly with honest UK companies. [Guidance paras 36 & 42]
A UK company would be able to outsource bribery by building a chain of subcontractors sufficiently long to distance itself from bribe paying [Guidance para 39]

The Bribery Act 2010 was passed with all-party support. It introduces an offence of corporate failure to prevent bribery unless a company can prove that it had ‘adequate procedures’ in place to prevent bribery. The Secretary of State for Justice is required, by section 9 of the Bribery Act, to provide official Guidance on ‘adequate procedures’. The corporate offence of failing to prevent bribery can only come into force after the Guidance has been issued. Transparency International UK has been campaigning for early publication of the official Guidance that would not dilute the Act. Publication of the Guidance was delayed by further consultations in late 2010 and a last-minute burst of lobbying in early 2011 by some business groups.

It is expected that the Act will come into effect from July 2011.

Download a copy of the UK Bribery Act 2010 and the Guidance.

OECD Report on Enforcement of Canada's Corruption of Foreign Public Officials Act (CPFOA) 1999

2011-03-31T14:06:00.000-07:00

Although Canada has recently made progress in investigating the bribery of foreign public officials by Canadian businesses, Canada has only completed one prosecution since it enacted its foreign bribery law in 1999. A new March 2011 report by the OECD states that Canada’s regime for enforcement of the Corruption of Foreign Public Officials Act (CFPOA) remains problematic in important areas.

The OECD Working Group on Bribery has just completed a report on Canada’s enforcement of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Enforcement has recently increased, with one company convicted in 2005 for violating the CFPOA, one ongoing prosecution and over 20 active investigations, the report notes. Credit for these cases is largely attributed to the RCMP International Anti-Corruption Unit, established in 2008. The RCMP Unit has two teams – one in Ottawa, Canada’s capital, and another in Calgary, Canada’s hub for the extractive industries. The Unit is also commended for its substantial public outreach and awareness-raising efforts. But the report warns that Canada’s ability to successfully prosecute these investigations will be in jeopardy unless the Public Prosecution Service of Canada is given the resources it needs to prosecute the large volume of cases that may soon follow the investigations.

Other main recommendations of the Group are as follows:

Amend the CFPOA so that it is clear that it applies to bribery related to the conduct of all international business, not just business ‘for profit’;
Ensure that sanctions applied in practice for CFPOA violations are effective, proportionate and dissuasive;
Take such measures as may be necessary to prosecute Canadian nationals for bribery of foreign public officials committed abroad; and
Clarify that police and prosecutors may not consider factors such as the national economic interest and relations with a foreign State, when deciding whether to investigate or prosecute allegations of foreign bribery.

The Working Group commended Canada for codifying corporate liability in the Criminal Code for CFPOA and other offences, as well as important initiatives for increasing reporting of foreign bribery in the public and private sectors, including enacting a Criminal Code offence of threatening or retaliating against employees who report misconduct.

The report, available at www.oecd.org/daf/nocorruption, lists all of the recommendations to Canada adopted by the Working Group on Bribery - which includes the 34 OECD Member countries plus Argentina, Brazil, Bulgaria and South Africa - and includes an overview of enforcement efforts and specific legal and policy features in Canada for combating the bribery of foreign public officials. Due to the significance of the issues raised in this report, the Working Group recommends that Canada report back to it on progress in October 2011. Following the usual process, Canada will also make an oral report within one year and a further written report within two years, which will be made publicly available.

MW Kellogg Ltd to pay £7 million in SFO High Court action

2011-02-16T08:03:00.000-08:00

The Serious Fraud Office (SFO) has taken action in the High Court today which has resulted in an Order for the company, M.W. Kellogg Limited (MWKL), to pay just over £7 million in recognition of sums it is due to receive which were generated through the criminal activity of third parties. The High Court made the Order under Part 5 of the Proceeds of Crime Act 2002.

The SFO recognised that MWKL took no part in the criminal activity which generated the funds. The funds due to MWKL are share dividends payable from profits and revenues generated by contracts obtained by bribery and corruption undertaken by MWKL's parent company and others. The agreement will lead to the payment of £7,028,077 within fourteen days in full and final settlement of the case. This sum represents the share dividends due and the interest which has accrued on these sums.

The contracts were awarded to a company partly owned by MWKL on behalf of its US parent company. MWKL reported concerns to the SFO under the "self referral" scheme and fully co-operated with the subsequent investigation. The SFO, working in partnership with the US Department of Justice, reviewed the conduct of MWKL and decided that the most appropriate approach was to remove the funds which will become due to the company through the unlawful conduct. This reflects the finding that MWKL was used by the parent company and was not a willing participant in the corruption.

The US parent company was one of four corporate entities which formed a joint venture to bid for contracts on a liquefied natural gas project in Nigeria. The joint venture created three special purpose vehicles to bid for, and subsequently run, the contracts. Three of the four contracts won by the joint venture were obtained through promises to pay or payments of bribes. The US parent company, Kellogg Brown and Root LLC and its predecessors (KBR) has been subject to a criminal and civil investigation in the US. The criminal investigation, which was conducted by the Department of Justice (DOJ), into the Bonny Island Project related to KBR and a number of other corporate and individual parties being involved in bribery and corruption. KBR has acknowledged, in its plea agreement with the DoJ, that it owned the special purpose vehicle created for the Nigerian project, through MWKL in order to distance itself from the corruption and avoid the consequences of the Foreign Corrupt Practices Act 1977. KBR had resolved all matters with the US authorities, including a civil settlement with the Securities and Exchange Commission, by February 2009.

The agreement also ensured that MWKL overhauled its internal audit and control measures to enable it to satisfy the SFO that its compliance systems are in accordance with UK law. MWKL has also agreed to pay the costs of the investigation.

The Director of the Serious Fraud Office, Richard Alderman said: "The SFO will continue to encourage companies to engage with us over issues of bribery and corruption in the expectation of being treated fairly. In cases such as this a prosecution is not appropriate. Our goal is to prevent bribery and corruption or remove any of the benefits generated by such activities. This case demonstrates the range of tools we are prepared to use."

Notes for editors:

The Serious Fraud Office is a government department responsible for investigating and prosecuting serious and complex fraud. The SFO is headed by the Director (Richard Alderman) who exercises powers under the superintendence of the Attorney General. These powers are derived from the Criminal Justice Act (1987).

Serious Fraud Office, Elm House, 10-16 Elm Street, London, WC1X 0BJ

Press Office tel: 020 7239 7001/7045/7004 or mobile: 0781 807 6688 or 0755 700 9842

Main switchboard tel: 020 7239 7272

press.office@sfo.gsi.gov.uk - or via - www.sfo.gov.uk

And the Results of the TI Corruption Perceptions Index 2010 are in..

2010-10-26T13:49:00.000-07:00

Trinidad and Tobago has moved from 79 to 73 in the Transparency International Corruption Perceptions Index. This is an improvement from last year... Jamaica has also improved from last year but still trails TT at 87 and the big winner in the Caribbean..the country with the lowest perception of corruption is Barbados and actually makes the top 20 at number 17.

Now, we know all the criticisms of the index - it measures perception not actually corrupt activity - also biased against the third world since it does not take into consideration the supply side of corruption.

However there is the BPI (BribePayers Index) which does the latter and really and truly "perception" of corruption is just as destructive to a society as the actual acts themselves. Once a country is perceived to be corrupt, some persons just accept that this is the way to do business, feel helpless in the fight against corruption and thereby contribute to the perpetuation of this environment through their own malaise.. this undermines public trust and confidence in our governance architecture which then cripples anti-corruption initiatives and efforts.

Let us continue doing our best to change ourselves as we learn more and become more enlightened as citizens about what to expect from our elected officials and our own obligations to our community. This way, with positivity, faith in our goals and considered collaborative action our society will change...for the better.

For full results click link below:

http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results

Thompson Reuters Foundation launches global anti-corruption hub

2010-08-29T08:40:00.000-07:00

Just a few months ago the Thomson Reuters Foundation launched a global marketplace for free public-service legal assistance and news and information about good governance and anti-corruption issues. CalledTrustLaw, it will connect NGOs, social entrepreneurs and governments in need of free legal assistance with lawyers willing to work at no cost. It also “enables lawyers to engage in high impact pro bono work with confidence and efficiency,” a Thomson Reuters announcement said.

An Introduction on the TrustLaw website says:

TrustLaw is a global centre for free legal assistance and anti-corruption news, run byThomson Reuters Foundation, the charitable arm of the world's leading provider of news and information, Thomson Reuters.

In common with all of the Foundation's programmes, TrustLaw aims to empower people in need by providing trusted information and leveraging professional expertise. We offer services to improve access to the rule of law and foster greater transparency.

Our mission is twofold:

Spread the culture and practice of pro bono work around the world, connecting those who need legal assistance with lawyers willing to work at no cost

Offer a one-stop shop for news and information on good governance and anti-corruption issues

At the heart of TrustLaw is an ambitious electronic platform called TrustLaw Connect, which offers lawyers and pro bono managers a way to easily connect with non-governmental organisations (NGOs), governments and social entrepreneurs seeking free legal services.

TrustLaw believes such clients have the potential to address many of the world's environmental, humanitarian and social problems, but their effectiveness may be impeded by lack of legal resources. Thomson Reuters Foundation strives to close this gap through its free services.

TrustLaw also features a growing repository of news and information around anti-corruption and governance issues, including national legislation, international conventions, articles, reports, country profiles and law reviews.

Content comes from our own team of specialist journalists as well as from international institutions, law firms, governments, NGOs and others.

GTI Applauds World Bank on Improved Disclosure Policy, Though Significant Weaknesses Remain

2009-11-04T13:57:00.000-08:00

For immediate release – 3 November 2009

The Global Transparency Initiative (GTI) today released its analysis of the World Bank’s new draft disclosure policy, Toward Greater Transparency Through Access to Information: The World Bank’s Disclosure Policy. The analysis concludes that while the revised policy will bring greater transparency to the Bank, it still falls well short of the standards set out in the GTI’s Transparency Charter for International Financial Institutions, as well as its Model World Bank Policy on Disclosure of Information.

The GTI analysis, provided in advance of an anticipated 17 November 2009 meeting of the Bank’s Executive Board to consider the draft policy, recognises a number of important advances in the Bank’s proposals. The Bank is poised to take a major conceptual step by accepting the principle that all Bank information should be available to the public unless it falls within the scope of the regime of exceptions. Other positive commitments include:

§ disseminating more materials in advance of Board meetings;

§ releasing the summaries of Board meetings;

§ launching a proper system for processing requests for information; and

§ establishing an independent appeals body.

Unfortunately, the proposed exceptions to the presumption of disclosure threaten to severely undermine these positive developments. Governments and third parties, such as Bank contractors, would be able to veto the release of almost any information they provide to the Bank. The draft policy also provides nearly absolute protection to internal information through a “deliberative process” exception, viewed as so central that it is posited as an independent principle in the policy, instead of being included as an ordinary exception.

The GTI recognises that certain interests need to be protected through exceptions, for example to protect personal information, health and safety. However, it recommends more nuanced and precise harm-based tests to protect legitimate interests such as relations with other States, the commercial interests of third parties, and the free and frank provision of internal advice.

Also troubling is the proposal’s assertion that the Bank’s disclosure policy trumps national right to information laws. Among other things, this would restrict access to the statements made by country representatives such as the Executive Directors in official World Bank meetings.

"The GTI congratulates the Bank for making some very important strides forward in the new proposed policy," said Toby Mendel, Senior Legal Advisor, ARTICLE 19. "However, the very wide exceptions being proposed could really undermine the policy. The Bank should make a strong commitment to openness, as many of its members have in their national right to information laws."

Bruce Jenkins, a consultant with the Bank Information Center, noted that while the revised policy is an improvement from previous iterations, it is not without significant weaknesses. He stated that"the Bank has taken major steps forward, including expanded routine disclosure and a first-of-its kind independent appeals body. However, it then partially claws back these gains through heavy-handed limitations, such as the withholding of draft information that would undermine more participatory decision-making processes."

The GTI calls on the World Bank to revise the draft Policy so that it is better aligned with the standards set out in the GTI Transparency Charter. It is ready to offer any assistance to the Bank to achieve this goal.

NOTES TO EDITORS:

The GTI Analysis is available at: www.ifitransparency.org
For more information please contact: Toby Mendel, Senior Legal Counsel, a19law@hfx.eastlink.ca, +1 902-431-3688, Toby McIntosh, FreedomInfo.org, tmcintosh@bna.com, +1 703-887-5197 or Bruce Jenkins, consultant, Bank Information Center, +1 202-329-6875.
The GTI is an independent network of organisations that works around the world to promote access to information held by international financial institutions.

Zambia disbands graft team that prosecuted Chiluba!

2009-10-30T10:47:00.000-07:00

Since we previously did the Chiluba story on this blog - thought this latest release from the Associated Foreign Press of interest.

LUSAKA — Zambia will disband the anti-graft team that prosecuted ex-president Fredrick Chiluba, drawing accusations Friday that the government was seeking to bury the case two months after his acquittal.
Vice President George Kunda told parliament late Thursday that the special task force created to investigate corruption allegations against Chiluba would now become part of the Anti-Corruption Commission (ACC).
The previous government of the late president Levy Mwanawasa had created the task force in 2002, saying the commission did not have the capacity to investigate complex cases.
But Kunda said all cases handled by the task force will be handed over to the ACC.
"Under this policy, the anti-corruption commission shall be the lead institution in the fight against corruption," he said.
Anti-graft watchdogs denounced the move as a politically motivated, saying it cast doubt on current President Rupiah Banda's commitment to rooting out graft.
"This whole decision was politically motivated and meant to stop people from talking about the acquittal of Chiluba," Transparency International Zambia president Reuben Lifuka told AFP.
"This is a clear testimony that the government is not serious in fighting corruption," Lifuka added.
In August, Chiluba was acquitted on charges of misappropriating 500,000 dollars in public resources as he developed a taste for tailor-made shoes and suits.
The executive chairman of the task force, Max Nkole was sacked a week after the acquittal and his effort to appeal the ruling was quashed.
Given Lubinda, head of the African Parliamentarian Network Against Corruption, said the move showed government was not serious about the fight against corruption and would tarnish the country's image.
"The government is to blame for the bad image created to the outside world. Since the death of Levy Mwanawasa," he said.
"Zambia's image as far as corruption fight is concerned has been dented. They have decided to disband the task force because they want to protect their friend Chiluba," Lubinda said.
The former president still faces legal action in a separate matter stemming from a graft conviction in Britain, where a court in 2007 found him and former aides guilty of stealing nearly 50 million dollars of state funds.
In the London case, Chiluba and others were found guilty of defrauding the Zambian government, and the court ruled that he should be denied access to his pension at Barclays Bank.
Zambia's government last year began efforts to register the judgement locally, which would allow authorities to seize his assets to recover the money. Chiluba has argued that the British court ruling should not apply here.

Transparency International launches Global Corruption Report 2009: Corruption and the Private Sector

2009-09-28T12:04:00.000-07:00

Transparency International (TI), a leading anti-corruption organisation, has launched a wide-ranging review of corrupt practices in the private sector, including bribery and undue influence, corporate fraud and cartels. New challenges for carbon trading markets, sovereign wealth funds and emerging economic powers in Asia and Latin America are also covered.

TI’s Global Corruption Report 2009: Corruption and the Private Sector features more than 75 experts examining the scale, scope and devastating consequences of corporate corruption, ranging from small entrepreneurs in Sub-Saharan Africa to multinationals in Europe and North America. These are complemented by 45 in-depth country reports (Trinidad and Tobago country report included). Best practices and practical recommendations for businesses and governments are also identified.

The Report is available for download here.

Oh Khaleda! Women and Corruption...

2009-09-27T10:24:00.000-07:00

Earlier this month, Khaleda Zia, the former Prime Minister of Bangladesh was committed to stand trial with her son and other top ranking officials for embezzling approximately 300 000 dollars which was originally intended to build a state orphanage. Zia, who became the first female Prime Minister of Bangladesh in 1991 and who was ranked number 33 in the Forbes list of the world's 100 most powerful women has certainly dropped from glory.

The Charges

The circumstances giving rise to the charges were that the plaintiff alleged that the accused in collaboration with each other misappropriated Tk 2,1071,643 belonging to Zia Orphanage Trust. The accused withdrew the money through cheques from November 11 to March 28 in 2007 from Prime Bank, New Eskaton Branch in Ramna, where Tk 2 crore was deposited in the account of Zia Orphanage Trust. Tk 1071,643 comes as interest against Tk 2 crore.

A foreign firm in 1991 donated $ 12,55,000 (then equivalent to Tk 4,44,81,216) for the welfare of orphans. The then BNP government deposited the money with a bank and kept it till 1994, according to the case details. The amount increased to Tk 5.3 crore with interest in four years.
The prime minister's office later distributed the money in two separate projects in Bogra and Khulna districts under the name of Zia Orphanage Trust, the case statement said. Of the Tk 5.3 crore, the accused embezzled around Tk 2.11 crore from the trust, according to the statement.

The plaintiff in the case statement alleged that though there were hundreds of orphanages in Bangladesh, the then BNP government did not distribute the money among them. With a view to misappropriating the money, the then prime minister Khaleda Zia formed Zia Orphanage Trust, which was registered at the sub-registry office in Gulshan in the city on September 5 in 1993, according to the case details. The address of the trust was mentioned as House No-6, Shaheed Mainul Road at Dhaka Cantonment, which is the residence Khaleda Zia and her family members.

About Khaleda

Born in 1945 to Iskandar Majumder, a businessman, and Taiyaba Majumder at Dinajpur district in north-western Bangladesh, Zia's eventual rise to political power could hardly have been predicted.

According to records she got married in 1960 to Ziaur Rahman, a prominent war hero who himself later became the President of the Republic and formed the Bangladesh Nationalist Party (BNP)in 1978. However, unlike Hilary Clinton, until the assassination of her husband in an abortive military coup in Chittagong on 30 May 1981, Zia had taken little to no interest in either politics or public life.

From all reports, even when her husband was propelled to power after the political changes in 1975, "she remained a shy and withdrawn housewife who devoted most of her time grooming up her two sons".

After the assassination of her husband, Vice President Sattar took over the reigns of the BNP party and acted as President. This however was short-lived after a successful military coup of sorts headed by Chief of Army Staff General H.M. Ershad who proclaimed martial law on 24th October 1982. In 1983 Sattar appointed Zia as Vice Chairman of the BNP party and when he retired in February 1984 Zia took over the leadership. So that it would appear that her ascendancy to the leadership of the BNP party came less through the dint of hard work but more by a quirk of fate!

However, how this woman handled this new power initially was impressive, even if one shuns her as a role model given these allegations. Zia was seen to work hard as leader of the opposition to regain political power for the BNP party. Records of the early days of her rise demonstrate effective leadership and resolve on Zia's part.

"She stood resolutely, took the reins of BNP and with like minded pro-democratic parties and elements, formed the 7-party Alliance and started uncompromising resistance against the usurper of people's rights.

In the Parliament elections that followed on 27 February 1991 under a Non-Party Caretaker Government, Begum Khaleda Zia led her party to a thumping victory, herself emerging as the most popular political leader of the country. On 20 March 1991 she was sworn in as the country's first woman Prime Minister in a Presidential form of Government. Respecting the wishes of the people, Begum Khaleda Zia and her party took the lead in switching over from the Presidential to the Parliamentary system of Government in order to give the hard-won democracy a permanent institutional shape. She formally took over as the Head of Government on 19 September 1991 under the Parliamentary system.

Begum Zia's Dall-Bhaat (lentil and rice) approach received both regional and international acceptance as a tangible programme for poverty alleviation in SAARC countries as well as in other developing nations.

She became Prime Minister for the second consecutive term after the February 1996 general election.

Her party BNP restored the parliamentary system through the 12th amendment to the Constitution in 1991 and introduced the Caretaker Government for holding neutral and free election through 13th amendment to the Constitution in 1996.

The government of Khaleda Zia made tangible progress in empowering huge rural womenfolk in the countryside. Her government brought about major reforms in the education sector that included introduction of compulsory free primary education, free education for girl students, stipends for the girl students and food for education programme. Side by side, she initiated bold reforms to revitalize national economy, accelerate production in all sectors and to alleviate poverty. Agriculture, the mainstay of Bangladesh's economy, was given the main thrust to achieve autarky in food production in the shortest possible time.

Promoting good neighbourly relations, strengthening regional cooperation within the ambit of SAARC, strict adherence to the UN Charter and furthering world peace and amity were the cornerstones of her government's foreign policy.

In the 1996 polls, the BNP emerged as the largest opposition party in the country's parliamentary history with 116 seats. The party under the leadership of Begum Zia formed a four-party opposition alliance on 6 January 1999".[Life Sketch BEGUM KHALEDA ZIA Hon'ble PRIME MINISTER PEOPLE'S REPUBLIC OF BANGLADESH]

So there we have a stellar record of a woman exercising political power as commendably as any other of her male counterparts. Studies, though challenged by many, have suggested that women are lest prone to corrupt acts than men. According to the World Bank in 2001 in an important policy statement on gender equality,
‘Engendering Development’, there is a strong relationship between relatively high levels of female involvement in public life and low levels of government corruption. The report concludes that this finding lends ‘additional support for having more women in politics and in the labor force – since they could be an effective force for good government and business trust’ (World Bank, Engendering Development, 2001:96).

Women & Leadership

In the Western world, with the evolution of the feminist movement and the growing empowerment of women, there has been increasing involvement of women in politics. If one were to look at the Scandinavian countries we see 40% representation by women on the legislature and in fact this is the highest political representation of women in the world. Followed by, interestingly enough, leaders in the Asian continent. So I wonder, is it that women in Asia are further along in terms of equality and non-discrimination in the political sphere or is it as Stanley Wolpert describes it an “accident of gender” or as Shakespeare would say having "leadership thrust upon them"? One study singled out a commonality in these Asian women leaders as being the manner in which they came into office in the first place. In most cases, like Zia, these women are victims of the violent death of a close male relative – a husband or father. And it has been said that even in the case of exceptions where they were groomed for the highest office it was not by their ability alone but more by reason of their proximity to male rule.

Indira Gandhi, for example, was the daughter of the illustrious Jawaharlal Nehru who died a natural death. Benazir Bhutto assumed the mantle of the Pakistan People’s Party after the hanging of her father Zulfikar Ali Bhutto by the military leadership. While Indira and Benazir had some amount of political experience the others like Chandrika Kumaratunga of Sri Lanka, and Zia lost their husbands, both politically significant members, to assassination.

Accident or not, it would seem that Zia, if the allegations are proved to be true, despite her commendable strength, vision and determination exhibited throughout her leadership, may put the lie to this myth that women are less corrupt than men.

[ LMG World TV digression. Interestingly, although, as we have seen above, it is unremarkable that the former housewife of a political war hero becomes a leading political figure, it would seem far less likely that such a person develops an innovative economic aid programme, especially in a country like Bangladesh. Bangladesh in this regard is a particularly interesting study of how one country has responded to the challenges of poverty. We should not forget that Bangladesh is also the home country of Mohammed Yunus, Noble Prize Winner and Founder of the Grameen Network which spearheaded the creation of the, now so-popular, micro-finance model]

On the Collapse of a Commission ..

2009-09-08T15:08:00.000-07:00

And so there we have it, the apparent collapse of the Commission of Enquiry into UDeCOTT and the construction sector in Trinidad and Tobago. The news came yesterday when Chairman of the Commission Professor John Uff held a press conference instead of opening the fourth and last hearing of the enquiry. Uff read a prepared statement which stated

"It seems to be generally accepted that the Commission, when issued by His Excellency the President on 9 September 2008 and extended on 10 December 2008 was not, as it should have been, published in the Gazette. That is a formality which can be cured at any time. However, it seems to be the opinion of most of the lawyers involved in the Enquiry that, unless and until it is cured, the Commission cannot take effect under the Commissions of Enquiry Act and the powers provided by the Act are therefore not available. If and when action is taken to regularise the Enquiry, it is suggested that publication in the Gazette at that stage will not have retrospective effect and that a validating statute would be necessary. I should say that a contrary opinion has been provided to the effect that gazetting at this stage would validate the Enquiry retrospectively. This matter is still under review."

Cynicism abounds throughout the small twin island state of Trinidad and Tobago as the Commission of Enquiry saga which had begun amidst much public furor [after the firing of then Minister of Trade and Industry, Dr. Keith Rowley who had demanded greater oversight of the state-owned enterprise UDeCOTT] now ends amid questions, much like those surrounding the bombing of the World Trade Center of how, when and why?.

A Consideration of the Reason Advanced : Failure to Gazette the Commission of Enquiry

Coming as the latest chapter after a tirade of challenges, from UDeCOTT, Mr. Calder Hart and their counsel, which have plagued the enquiry's continued work from inception and under circumstances where Government officials were seen on numerous public platforms continuing to support and praise the beleaguered state enterprise, many view with grave suspicion what they see as just the last and ultimately most successful attempt to derail the Commission.

The reason advanced for the cancellation of the fourth session is the failure on the part of officials unknown to gazette the Commission of Enquiry. So what does this mean?

According to section 15 of the Commission of Enquiry Act Chapter 19.01 "All commissions under this Act and all revocations of any such commission, shall be published in the Gazette, and shall take effect from the date of publication". The Gazette is the official publication of the Government which is in many cases the statutorily mandated form of official notice to the public. Ordinarily failure to gazette would not invalidate the act done, however in the case of a Commission of Enquiry under the law of Trinidad and Tobago it is expressly stated that it shall only take effect from the date of publication.

According to the Privy Council in the 2007 St Vincent and the Grenadines case of Joachim v Attorney General, the proceedings of the inquiry are ineffective without the gazetting. In that case it was ruled that section 16 of the St Vincent and the Grenadines Commission of Inquiry Act — which is on all fours with our section 15 — made the proceedings ineffective until gazetted.

It was stated in that decision that “Parliament must indeed be taken to have intended the consequence of non-publication of the commission to be total ineffectiveness. That intention is as plain as can be from the last ten words of section 16: ‘and shall take effect from the date of such publication’,”

But has the Commission really collapsed?

The question now is - can this defect be repaired? and if so, by what means? There have been two main arguments advanced for the repairing of the defect and I consider each of them briefly below.

1. Publish in the Gazette now and rely on the retrospective operation of section 42 of the Interpretation Act Chap. 3.01

Section 42 reads as follows:

"An appointment (however described or designated) under a written law may be made to have effect retrospectively from the date upon which the person appointed in fact first performed any of the functions of his appointment."

Lawyers are going back and forth on whether this section is applicable. My view is that it is not applicable. That section relates to the appointment of public officials and not expressly with a Commission of Enquiry. To go this route will be to rely on the hope that it would apply and merely leave the door open for not so ingenious legal challenge at a later stage.

2. Pass an act of Parliament validating the Commission of Enquiry retrospectively.

This in my view is the safest route. It can be done very quickly, since there is no need for compendious legislation. There may only be the need for 2-3 clauses. Parliament can change the law at anytime. If there are those who are of the view that this retrospective application of the validating act would operate to breach some individuals fundamental rights and freedoms under the Constitution - then the precaution should be taken to have the Act passed by the requisite special majority.

Common Law Enquiry?

Professor Uff, quite interestingly, threw another spoke in the wheel of the argument that the Commission of Enquiry was illegal or invalid. He stated that he was of the view that in a common law territory - if there is no statutory law it does not mean that there is no law that would operate to cover a particular scenario - the common law (judge made law - doctrine of precedent) would apply. Accordingly, since there is precedent and provision in the British common law for common law enquiries the instant Commission will be covered thereby. I have not researched this issue as yet - so I prefer not to express a legal opinion on it. It does at first blush though appear to make very good sense.

So, in synopsis, there has been a defect, but I have not heard anyone credibly advance that it is fatal. It is curable and the safest cure would be the validating legislation. Ironically, in the present circumstances, the Government [which is perceived by many as not entirely supportive of the work of the Commission, given their vociferous defence of UDeCOTT despite the evidence adduced], will be forced to demonstrate to the public whether in fact they are desirous of remedying this defect.

In fact, it is far better that this defect has come to light now and not later during the course of judicial challenge brought by any of the parties before the Commission.

And the result is....

Though many may refuse to admit it, as the evidence burgeoned through our television sets, day after day, telling stories of the apparently unchecked exorbitant expenditure on projects being undertaken by the state agency and of alleged improprieties, irregularities and in some instances self-interested conduct on the part of the Chairman Mr. Calder Hart and other UDeCOTT consultants and employees, a growing though reluctant optimism was being felt throughout the country. Some, though not daring to mutter out loud, allowed themselves the luxury of the cautious and hopeful thought 'perhaps something would come of this Commission?'.

On the other hand the perennial cynics who are never wrong and love to craw "I told you so!" now seem not to be able to contain their mirth that they have been proven to have been right all along. The Commission was a sham, a farce - no hope of success!!

However, as one of the many persons involved in one way or another with the work of the Commission who gave of themselves tirelessly hour after hour, poring over thousands of pages of transcripts, cases, submissions and reports and sitting through hearing after hearing, making submissions, questioning witnesses and unearthing information to inform the Commission's eventual findings and recommendations, such assertions ring hollow. Those involved know the plethora of very specific material which has been advanced before the Commission demonstrating critical gaps in our legislative, regulatory and operational frameworks existing in our public sector which no doubt will influence the eventual findings and recommendations of the Commission. We also know of information which has been brought to the fore in respect of alleged improprieties on the part of public sector employees. We also know that some persons have been exonerated by the information adduced, some persons have had to resign and in the case of one state-enterprise we saw consultants, lawyers and board members unceremoniously replaced. And last but by no means least, we know about the vast sums of money and resources which have been devoted to this Commission both by the Government and private citizens who bore the brunt of their own legal costs.

Margaret Chow, Former MD HDC

So the question emerges, if there are no further hearings as had been planned - does this mean that the Commission was a sham or a farce? Is this really the collapse of a Commission?

For two reasons, I say No!

(i) The Commission's work was practically complete

Firstly, from a practical perspective, according to Uff, outside of the expanded Terms of Reference (TOR) relating to the Cleaver Heights Development Project, there was very little else left to do by way of public hearing. When one considers the stage of the Commission's work in respect of the original and first amended Terms of Reference (TOR) which were items (i) - (viii) on UDeCOTT and the procurement practices in the Construction Sector and (ix) dealing with the Cleaver Heights Development Project, all that was outstanding in respect of these items were the final partially completed submissions of UDeCOTT and Mr. Calder Hart.

Counsel for both these parties had indicated that they were not minded to cross-examine the explosive testimony of the last and unexpected witness Mr. Karl Khan, who gave evidence of a familial relationship between Mr. Calder Hart, Chairman of UDeCOTT and the directors of CH Development & Construction Company Ltd which was personally invited by Mr. Hart to tender, in breach of UDeCOTT's own published tender requirements. Significantly, this company was awarded a 368 million dollar contract over two other bidders whose prices were at least 60 million dollars lower.

In respect of the reason for the Cleaver Heights Development Project first amended TOR, the evidence had been produced and subjected to cross examination by all affected parties. Net result - not one shred of evidence was adduced that
(a) 10 million or any other sum was missing from the project as alleged
(b) Dr. Rowley was connected in anyway with any impropriety on the project.

According to Commissioner Khan during the course of the proceedings there was not a scintilla of evidence impugning the character of Dr. Rowley.

Notably, the Government had stated that they had hired Bob Lindquist (Forensic Accountant) to examine the accounts of the project forensically - no Lindquist report was produced to the enquiry.

HDC later in the day, after the removal of their previous lawyers, the entire board except its Chairman and the resignation of the Ag MD Margaret Chow - promised yet another expert's report on the issue - this too was never forthcoming, despite several and repeated requests from the Commission.

Uff's view is therefore that there is no need for further hearings on those items of the TOR.

What remains is only the expanded TOR which was generated by the Government during the last week of the last scheduled session of the Commission. In fact, it is clear that the fourth hearing would not even have been set were it not for this expanded TOR. The expanded TOR related to the Cleaver Heights Project and mandated the Commission to look into the the design, delays on the project and other operational matters which had nothing whatsoever to do with the well publicised genesis of the issues surrounding Cleaver - (remember 10 or 20 million was supposed to have been missing!). In respect of this aspect Uff neatly states

"I next deal with what is to happen about the issues which would have been the subject of this week’s hearing. This refers to the issues in the second extension to the Terms of Reference dated 21 May 2009 which concern alleged defective and delayed work at Cleaver Heights. On those issues the evidence and submissions have yet to be heard. It follows that a fresh commission can be issued (and Gazetted) at any time. That has not happened and as a result we do not intend to take any action with regard to those issues unless invited to accept a fresh Commission. If a fresh Commission is to be issued decisions will have to be taken as to who should be appointed as Commissioners and those Commissioners will have to decide whether they will accept the appointment. There the matter rests."

(2) The true purpose of a Commission was accomplished

In order to assess the success or otherwise of a Commission of Enquiry one needs to appreciate the purpose of such a body. Under the Commission of Enquiry Act Chap.19.01 the President of Trinidad and Tobago has the power to appoint such a Commission to enquire into the conduct of any officer in the public service in Trinidad and Tobago, the conduct or management of any department of the public service or of any public or local institution, or into any matter in which an enquiry would, in the opinion of the President, be for the public welfare.

Contrary to widely held belief, a Commission of Enquiry is not a body established to determine who is guilty of either a criminal or civil wrong. It is not a necessary precursor to charging someone and it does not result in charges being laid. Very simply a Commission of Enquiry is one which is established as the ultimate citizen's accountability mechanism to satisfy their need to know the facts on an issue which is of serious public concern. After the publication of the report the executive may do with it what it sees fit. Neither the President nor the Prime Minister are statutorily bound to accept the findings or follow the recommendations. This factor seems to be consistently missed and this factor alone results in many of the uninformed expectations of a Commission of Enquiry.

A Commission of Enquiry must be distinguished from judicial proceedings or the criminal justice system and must never be viewed as a substitute therefor. Commissions are in fact largely viewed as inappropriate to investigate alleged criminal conduct.

In the Ontario Court of Appeal in Re The Children’s Aid Society of the County of York, Justice Mulock stated:
“…in answering the questions submitted it might be advisable to point out the nature of the inquiry in question. It is one to bring to light evidence or information touching matters referred to the Commissioner…where useful documents or other evidence could be obtained, it would seem reasonable that
he avail himself of such a source of information… It is for the Commissioner,
from all available sources, to bring to light such evidence as may have a bearing
on the matters referred to him. …”

And according to Justice Riddell:

“… A Royal Commission is not for the purpose of trying a case or a charge against any one, any person or any institution – but for the purpose of informing the people concerning the facts of the matter to be inquired into. Information should be sought in every quarter available."

Commissions can be particularly useful in uncovering the systems, methods and procedures used by corrupt officials which processes are usually not the focus of conventional criminal investigations which are more focused on obtaining proof of the illegal act itself. Commissioners are usually experts in the relevant fields and can give constructive recommendations to prevent the recurrence of the impugned activity. A Commission is expected to investigate and come to grips with what happened, why it happened and who is responsible for causing it to happen. It must do more than place facts on the table and consider the most appropriate remedy or solution to address the problem.

So, has this been achieved by this Commission? Does the instant Commission pass this litmus test?

Certainly, it would be difficult to argue that pertinent facts have not been unearthed relative to the TOR. Evidence of what was going on in UDeCOTT, the construction sector and surrounding the issue of alleged missing funds on Cleaver has been quite comprehensively adduced. Even now, without a report of the Commission, the relevant authorities can initiate appropriate investigations into the matters which have arisen.

With respect to the recommendations, Uff has unequivocally stated that come what may, he has every intention of producing the required report based on the evidence adduced before him. According to Uff, whether or not the Commission is published in the Gazette or validated by an Act of Parliament, he will be finalising his report and submitting it to the President.

Based on the professional manner in which Professor Uff has run the Commission and his wisdom in the face of mounting challenges, I for one, have every confidence in his ability to produce a report with appropriate recommendations for the benefit of the people of Trinidad and Tobago.

That being said, for the naysayers and the doubting members of the public, I urge a more temperate view on the events surrounding the close of the Commission. Much has been accomplished and much much more to be gained in the months and years ahead. What will come of this enquiry will depend in large part, not on what the officials do with the information that has been unearthed, but on what we as, right thinking citizens of Trinidad and Tobago, will do with the information we have gained as we exercise our democratic rights, if and when the time comes.

Former Israeli PM Charged for Corruption - a Test of Democracy

2009-08-30T12:03:00.000-07:00

Mr. Ehud Olmert made history this week as the first former Prime Minister of Israel to face criminal charges. This came after a series of corruption allegations, probes and police investigations since as early as 2006. The ongoing corruption scandals had forced Olmert to resign earlier this year. Olmert however, has staunchly asserted his innocence despite growing evidence surfacing of impropriety while he was in office.

The indictment against Olmert was served at the Jerusalem District Court on August 30, 2009 and it reportedly includes counts of obtaining by fraud, fraud, breach of trust, falsifying corporate documents and tax evasion. It refers to three out of the four corruption-related cases standing against him:
(i) 'Rishon Tours' where he is accused of using his Travel Agency Rishon Tours to manage a special account for him and double charge for some of his travel and speaking engagements ,
(ii) 'Talansky' (Also known as 'Money envelopes' affair) where he is accused of receiving over 150 000 USD in cash envelopes from a Jewish-American Businessman Morris Talansky for political favours and
(iii) the 'Investment Center' where he is accused of acting in conflict of interest by arranging investment opportunities for a friend, Uri Messner, while he was industry minister.

Once again, I find the timing of this incident somewhat coincidental since in my last blog entry, when dealing with corruption in the construction industry in Trinidad and Tobago, I sought to draw a positive though cursory comparison between Israel's plan for economic development and the Vision 2020 Plan of Trinidad and Tobago.

Israeli Democracy?

Israel, a developing country as well, has been said to be "the only democracy in the Middle East" enjoying a special relationship with the United States, some considerable economic success, and engaging in sporadic requests for EU membership.

However, I would certainly not be the first one to suggest that numerous factors make this self styled democracy somewhat strained. Israel has had very fervent critics from inception, who have asserted that Israel's formal democratic status is a sham given that Israel is constitutionally termed a "Jewish Democratic State" with no separation of synagogue and state despite the fact that approximately 20% of its citizens are not Jewish. Even more controversial is that several laws are explicitly discriminatory. These can be traced back to Israel's foundation in 1948 which, driven primarily by the racist genocide suffered by Jews in Europe during the Second World War, was based on the notion of a Jewish state for Jewish people. Some of Israel's laws reflect this principle and as a result discriminate against non-Jews, particularly Palestinians who had lived on the lands for generations. The Law of Return for instance provides automatic Israeli citizenship for Jewish immigrants, whereas Palestinian refugees who were born and raised in what is now Israel are denied even the right to return home. Other statutes explicitly grant preferential treatment to Jewish citizens in areas such as education, public housing, health, and employment.

Leaders in post colonial democratic states like those in the English Speaking Caribbean may readily turn up their noses at this style of democracy where there is no separation of church and state and overt state sanctioned discriminatory action against citizens. Certainly here in the Caribbean, we may very well feel that if we were all to sit the Democracy test our States would achieve higher grades than Israel.

But, is this really true? Of interest, no doubt spurred on by the controversy surrounding its democratic status, Israel has established its own Israel Democracy Institute. Established in 1991, the Israel Democracy Institute (IDI) is an independent, nonpartisan, nonprofit think tank located on the seam between academia and government. Comprising a select cadre of Israel's leading thinkers, the Institute is the premier nongovernmental agent of change in the Israeli body politic and has been driving the process of Israel's transition from formal to substantive democracy.

In 2009 IDI produced a Democratic Index which ranks and compares Israel with several established democracies using several institutional, rights based and stability indicators. The Democratic Index reveals that despite some demonstrable improvement in some indicators, Israel still received low scores when compared with the developed democratic countries that participated in the study. The general trend change compared to the 2008 Index was mixed. Out of the 18 indicators updated this year, while seven registered improvement, six registered deterioration, and five showed no change. When comparing internationally, Israel’s ranking went up in three indicators, remained unchanged in ten indicators, and declined in four indicators.

Interestingly, the main improvement was recorded in the institutional indicators, following a slight rise in the political participation and representativeness measures. Olmert's resignation in February 2009 amidst corruption allegations which had been escalating since the last quater of 2008 caused a negative impact on the scores of Israel on the indicators of corruption and stability in the political system. Tzipi Livni, who replaced Olmert as head of the Kadima party, failed to form a coalition and, therefore, not for the first time, elections were called before the official end of the government’s term. According to the Index since both the process by which the government was dissolved and the bringing forward of the date of elections were set in motion by suspicions of corruption against the Prime Minister, there is room for drawing a connection between the growing levels of corruption and the increasing instability of the political system

It may be that the relative scores on the IDI Democratic Index that the very serious corruption allegations which forced Olmert to resign are negative indicators from the point of view of democratic governance and corruption levels. I take a different view and will develop that a little more below.

Juxtaposing Trinidad and Tobago and Israel for the purposes of useful comparison may not be as far-fetched as some may think on its face. The Heritage Foundation in Washington and the Wall Street Journal have developed Economic Freedom Index which they define as "the fundamental right of every human to control his or her own labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please, with that freedom both protected by the state and unconstrained by the state. In economically free societies, governments allow labor, capital and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself".

In developing the Index ten indicators were measured and the methodology is transparent, available for download here.

With the one qualification that I make absolutely no assessment of the merit or demerit of the methodology [since I must confess that being of legal background statistical measurement and analysis is not my area], I think the results are pretty instructive in the context of comparing these two nations. The results for both Israel and Trinidad and Tobago on each of the indicators are set out below:

Indicator Israel Trinidad & Tobago

1. Business Freedom 67.8 60.1
2. Trade Freedom 86.0 79.8
3. Fiscal Freedom 57.1 79.7
4. Government Size 35.1 75.6
5. Monetary Freedom 83.7 72.2
6. Investment Freedom 80.0 70.0
7. Financial Freedom 70.0 70.0
8. Property rights 70.0 60.0
9. Freedom from Corruption 61.0 34.0
10.Labor Freedom 64.9 78.3

Despite significantly outscoring Trinidad and Tobago on several indicators, the end result was that Trinidad and Tobago received the score of 68.0 and Israel received an overall score of 67.6 with the countries ending up back to back on the list of 179 countries, 41st and 42nd respectively!

I was struck by this, having whimsically embarked upon this blog item on Olmert's corruption charges, not expecting in my comparison of Israel and Trinidad and Tobago that I would find so many similarities.

What this index reveals, however, is that behind more or less similar average overall scores, we are actually dealing with two totally different small developing countries. One is small and seen as "the enemy of its region" surrounded by nations with which it has an almost war-like relationship, the other a small, oil state surrounded by semi-dependent, touristic tropical islands. That Israel scores poorly on government size is the direct consequence of it being in a state of war, something which translates immediately into a far above average government size. The rating is constructed in such a way that large government size is in normal circumstances positively correlated with an increased probability of corruption and reduced freedom. The other way around, the situation of Trinidad and Tobago with its oil wealth translated into a relatively free/capitalist structure with a small government - a situation normally assumed to lead to a reduced probability of corruption - reveals something quite remarkable: it is actually in the corruption indicator that the island state is posting its worst grade by far!

In other words, careful analysis of the component indicators unravels what was hidden when looking solely at the overall ranking. Although scoring similarly overall with Trinidad and Tobago slightly ahead, taking this on face value would be dangerous given the drastically different and remarkable scores on corruption levels. Israel with its large government (usually thought to result in higher corruption scores) is in actuality far less corrupt than Trinidad and Tobago with it's small government size.

No surprise really which is why I formed the view above. A system of governance
(i)which allows a state prosecuting office to operate independently and without interference in the investigation of a Prime Minister in office, (ii) has a strong media to aggressively expose alleged corrupt activity, (iii) which facilitates the voluntary resignation of a Prime Minister and (iv) which produces an institute like the Israel Democracy Institute is doing far better in terms of democratic governance and curbing corrupt activity, than let us say for arguments purposes Trinidad and Tobago.

This may not be off the mark given the following circumstances currently existing in Trinidad and Tobago:

1. Widespread allegations of corruption in the public construction sector - Commission of Enquiry appointed. Although the work is not complete, already damaging evidence adduced including the startling evidence of the Chairman of a State Company Board inviting a company to tender which shared his fax number and on which his wife's brother and brother in law were the directors. Awarding the contract to this company which was not the lowest or the second lowest tenderer.
2. Government officials steadfastly refusing to step down from office despite calls from throughout the country for them to do so.
3. Court ruling that the Integrity Commission established to protect integrity in public life acted unconstitutionally, unlawfully and maliciously in pursuing an investigation which was rumoured to be politically motivated.
4. Several important Government posts not filled for considerable periods of time, Director of Public Prosecutions, Solicitor General, Integrity Commission, Commissioner of Police,
5. Firing of a Government Minister for speaking out and calling for greater oversight over a state agency.
6. Allegations of the interference of the politically appointed Attorney General in public enquiries and prosecutions.
7. Threatened media - with a situation occurring where the Prime Minister caused two broadcasters to be suspended for criticising him on air.

These and many other incidents in Trinidad and Tobago may have contributed to the poor corruption score on the Transparency International Corruption Perception Index and the Index of Economic Freedom.

For me, I did not have to analyse the corruption indices and the Index of Economic Freedom to know that Israel was doing better than Trinidad and Tobago on the issue of confronting and enforcing the law against corrupt offenders. Whilst some may view the Olmert scandal as an indicator of high corrupt levels, I say it is arguably one of the strongest indicators of a robust democracy serious about addressing the issue of corruption.

Banda - Establishes Zero Tolerance Against Corruption Policy??

2009-08-28T23:49:00.000-07:00

Banda Promising Reforms..

OK OK. It seems that almost as soon as LMG World TV asked the question in our last post - how will Banda respond to the Chiluba acquittal on all corruption charges - our question was answered. A mere 10 days after the controversial verdict, President Rupiah Banda yesterday announced the launch of a new national anti-corruption policy, hoping, no doubt, to erase doubts over his government's anti-graft credentials after former leader Frederick Chiluba was cleared of embezzlement.

Interestingly, after the verdict the head of Zambia's Task Force on Corruption, Max Nkole was fired and his appeal in the Chiluba case was withdrawn by prosecutors.

The resulting controversy has raised some doubts about whether Banda would continue the anti-corruption crackdown launched by the late president Levy Mwanawasa, which had won Zambia praise overseas and which we had also noted in the last post.

Some excerpts from news reports are quoted below:

Opposition parties have accused Banda of interfering in the courts to win Chiluba's acquittal on charges that he embezzled 500,000 US dollars of public money.

Banda said the new policy would reinforce government's commitment to eradicating graft and provide a framework for government agencies to cooperate with the public in investigations.

"We renew our resolve to uphold the motto of "Zero Tolerance Against Corruption". The war against corruption is the responsibility of everyone," Banda said.

"My government shall remain committed to the rule of law and respect for human rights," Banda said.

"Even as we fight corruption we should not lose sight of the constitutional rights of those accused," he added.

Banda credited the government's efforts in fighting corruption with helping fuel Zambia's record economic growth over the last decade.

"The government has over the last eight years implemented a wide range of reform measures to combat corruption, streamlined the management of public resources and enhanced service delivery," he said.

"The reforms had a positive effect on the economy until the onset of the global economic downturn," Banda said.

The top British aid official in Zambia, Mike Hammond, urged Banda to show commitment in the anti-corruption fight.

"If the government of Zambia is to build on the momentum of the past success, it must be seen to take action against those that do not abide by the rules, and no individual should be above the law," Hammond said.

Britain has given more than 13 million dollars since 2000 to support Zambia's anti-corruption agencies.

Chiluba contemplative in Court
Chiluba has accused Britain of masterminding his prosecution, saying the case was driven by "imperialists".

The Chiluba Story

2009-08-24T23:50:00.000-07:00

As a precursor to our Zambia analysis, thought it might be useful to share some musings on Frederick Chiluba the former President of Zambia who earlier this week [17.08.09], was acquitted of allegedly embezzling nearly 500 000USD of state funds into accounts to pay for an extravagant lifestyle when he served as Zambia's first democratically elected leader from 1991 to 2001.

Like many others in the anti-corruption community, I was particularly surprised by the outcome of the trial because the circumstances of Chiluba's period of rule were well known to many. Several of Chiluba's colleagues had already been found guilty and jailed for embezzling state funds. Chiluba's own wife Regina was found guilty and sentenced to serve 3 years imprisonment for theft of state funds and Chiluba himself had lost a civil case wherein a UK court found that he had diverted approximately 46M USD into a London account.The Judge Peter Smith in that case, in his bold ruling, accused Chiluba of shamelessly defrauding his people and flaunting his wealth with an expensive wardrobe of "stupendous proportions". Smith subsequently went on to order Chiluba to leave his home in Lusaka which he found to be built on proceeds of embezzled state funds.

Not surprisingly therefore, the criminal charges filed against Chiluba in Zambia were just the last in a spate of investigations and prosecutions which most felt would go the way of the others. Many anti-corruption practitioners were anxious to see what the first internal criminal prosecution of an African leader for corrupt activity would yield and what broader repercussion such a judgment would have for African governance. The case was being called the "flagship corruption case for sub-saharan Africa".

Chiluba, a former bus conductor and trade unionist was hailed as one of a new breed of post independence African leaders who were democratically elected. Promising a spate of liberalization reforms and a commitment to a free market economy, some of which were in fact implemented, lamentably Chiluba, the second leader since Zambia's independence from British Colonial rule in 1964, followed the path of so many others on this unfortunate Continent. From very early on in Chiluba's reign it became obvious that things were not quite right. He started out by firing many of the independent thinkers in his Cabinet and surrounding himself with "yes men". It is said that corruption flourished as some Chiluba's cronies seemed more interested in lining their own pockets, than serving their country. [My foreign readers will forgive my local digression for a moment. There are some stark and very disturbing similarities between the widely held perception of Patrick Manning the current Prime Minister of Trinidad and Tobago and Chiluba in this regard but more on that in another blog!] Chiluba, then was perceived to have used his office to hound his predecessor, Kenneth Kaunda who had been the first post independence leader.

Kenneth Kaunda President of Zambia [1964 - 1991]

Although Kaunda had his own detractors, holding on to power through one-party rule, many saw Chiluba's intense prosecution of Kaunda as vindinctive. In 1997, Chiluba caused charges to be brought against Kaunda for conspiring in a failed coup plot and had him imprisoned. Chiluba had to be pressured by external forces to release Kaunda. Chiluba therefter used the judicial system again to attempt to strip Kaunda of his citizenship! After 10 years in power Chiluba who had gained quite a reputation for his flashy dressing, a fondness for expensive, monogrammed clothes, and high heel shoes to improve his diminutive height [he was a little over 5ft], had sold off state land at suspect prices and the state copper mine amidst scandal where much of the assets seemed to vanish for next to nothing. In 2001 Chiluba, true to form, fought to change the constitution so that he could remain in power for a third consecutive term, but acceded to internal party pressure to step down. His successor President Levy Mwanawasa [2002-2008]

in an anti-corruption campaign which he pursued until his death in 2008 successfully prosecuted Chiluba's colleagues and his wife Regina. Chiluba's defence in the criminal case was that the monies held in the account were actually proceeds of gifts given by businessmen and others to him personally and were not state funds. It was this money that he would have used to buy clothes totaling approximately 500 000 USD paid in trunks of cash in one instance. The court found in Chiluba's favour stating that the prosecution had failed to prove "beyond a reasonable doubt" that the money was state funds as opposed to gifts. It should be noted that the standard of proof in a civil case is much lower than in a criminal case i.e, the case must be proved "on a balance of probabilities".

To those of us from countries with far more sophisticated governance frameworks one of the first questions we would raise would be - Can a president personally receive monetary gifts of such large amounts??!! In Zambia, it would appear that the answer is yes! There is no law preventing a public official from receiving gifts of money nor any limit on the size of gifts. As I see it, these are the kinds of regulatory gaps in some newly democratic states which demonstrate the form of democracy without the accountability checks and balances which ensure democracy in substance. Regulatory inspection and overhaul needs to take place in order to begin to fight corruption meaningfully and sharpen enforcement mechanisms.

Preceded by Kaunda and Chiluba, and succeeded by Banda, Levy Mwanawasa who died in office in 2008 while pursuing his relentless anti-corruption campaign should not be forgotten. For those who feel that Africa is devoid of leaders who are willing to and capable of approaching the task selflessly and with integrity for the benefit of the people, his legacy will be that there is hope for African leadership. It has been said that Banda does not share Mwanawasa's exuberance to eradicate corruption and went "soft" on the issue. Already there are rumblings that the Chiluba trial was in some way politically influenced to cause the eventual outcome.

In the wake of this verdict all eyes will now turn to Banda. We at LMG World TV ask, which path will he follow? The worn path of post independence African rulers like Chiluba and Robert Mugabe or the rarer likes of Mwanawasa? Only time will tell, and we will be looking on.

Rupiah Banda President of Zambia [2008 - present]

Corruption & Africa : The Introduction

2009-08-24T18:25:00.000-07:00

I have been waiting for quite a while for the inspiration to start my blog posting here on LMG World TV and just as I was beginning to think that I was devoid of one creative bone in my body, today as I began reading the latest in corruption news I felt the familiar writers twinge to express.

So here goes. This year I made two trips to the continent of Africa, one to Tunisia in MENA (Middle East North Africa) and the second to Nigeria (Sub-Saharan Africa). The differences between the two could not be more stark from cultural, lingual, political, historical and economic perspectives and perhaps the differences could lend some insight into the plight of Sub Saharan Africa states. Tunisia with a population of a little over 10 million is culturally very middle eastern in its food, music, language and identity (approximately 98% Arab - CIA Factbook), the language is arabic and french, political system is a parliamentary democracy and historically a former french colony. From an economic perspective Tunisia has a diverse economy, with agricultural, mining, tourism, and manufacturing sectors and a GDP per capita of approximately 7900USD.

Nigeria on the other hand with an approximate population of 149 million is a former British colony, culturally diverse with 50% muslim, 40% christian and the rest indigenous cultures. There are over 200 languages and an economy centered around petroleum and a GDP per capita of 2300USD. According to sources oil-rich Nigeria, has been long hobbled by political instability, corruption, inadequate infrastructure, and poor macroeconomic management.

It would seem that Tunisia on a per capita basis is certainly more well off than Nigeria, providing its citizens with a higher quality and standard of living and this I did observe first hand when I was there, notwithstanding the grandeur of Nigeria's new capital city Abuja. Abuja, as ostentatious as LA, a city conceived and built from scratch by the Nigerian Government, some 20-30 years ago, to reflect the true essence of the country is full of fantastic structures, four and five lane highways, massive sometimes palatial homes but shockingly at night no traffic lights or street lighting! When I asked about why this was so, I was informed that there was not enough energy coming into the city!

No doubt, Sub-Saharan Africa is a fascinating continent reflecting a disturbing paradox of wealth and poverty. Some African countries can be said to be some of the richest in the world when one looks at the abundance of resources like oil, minerals, sunshine but also some of the poorest in the world when one considers the quality of life, health care and poverty statistics. Many writers have tried to explore the phenomenon about why Africa is poor with varying degrees of success.

It is clear that the answer or answers are not as simple as one would hope and some of the theories postulated will certainly ruffle the feathers of many. It certainly could not have helped Sub Saharan Africa to actualise when from very early its resource richness was seen as an object of plunder by external forces. It could not have helped that the growth of many of these nations was stunted by the mass exportation of slave labour or the subsequent "take vs build" and "divide & conquer" imperialist ideology, the remnants of which remain firmly embedded in the culture and thinking of the people. It could not have helped that people were thrown together with artificial boundaries regardless of culture, language or religion by external parties. It could not have helped that as the developed world in this century began to take responsibility for the travesty of Africa that the dis-empowering solution proposed was the "give a bible and some bread" philosophy without consideration of the longer term focus on sustainable economic growth and development.

Now while I am the first one to jump on the bandwagon of all the above reasons for Africa's plight and what follows is no watering down of this at all - there does come a time when responsibility must be taken from within the boundaries of Africa for the continued suffering of its people. Recently Obama in his speech in Ghana and Hilary Clinton as she made her tour of Africa as US Secretary of State urged the leaders to clean up the mess. Certainly it is easy for us to proselytize from the outside. Is it true that corruption is now a significant factor in Africa's current economic plight?

YES Africa has been raped and pillaged by other countries and suffered through dis-empowering aid efforts and continual disadvantage from unequal bargaining power in international trade negotiations BUT is that 100% of the story? Is there a level of culpability which the post colonial African leaders must have for the continued plight of Africa? Is it true that African Leadership seems attracted to positions of power not to serve but to enrich themselves? Is the African Leadership truly blind or ignorant to the effects of their actions on their impoverished constituency? This is the rhetoric now because the statistics are revealing that corruption does play a part in diverting the wealth of the countries' resources into the hands of a few to the detriment of the many. How big a part it plays when one takes all the factors into play? That is a question to be addressed. The future of the children of Africa will depend on the response of its leaders to the present crisis.

In this series Corruption & Africa, I propose to take one Sub Saharan African country at a time in no particular order and analyse (i) their political, regulatory and economic systems and (ii) the actions of their leaders to determine the extent to which corruption can be said to be a significant part of the answer to the question : why Sub Saharan Africa remains so impoverished? Many writers have traversed this road and we will be citing some of their work as references along the way. This is the LMG Window to Corruption and Africa. If this is a topic that interests you and you want to learn more I look forward to you taking this journey with me. If you have done some research in this area already, even better! Feel free to drop a line, statistic, story, factoid or point of view which will assist us as we build this work.