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Ethics Presentations and Speeches:
CORRUPTION The following are excerpts from two related presentations by Frank Vogl in his capacity as Vice Chairman of Transparency International - the not-for-profit anti-corruption organization - www.transparency.org. Please find here:
Building the Global Anti-Corruption
Agenda
Writing about Russia recently in The Wall Street Journal (January 9, 2001) former world chess champion Gary Kasparov stated: Corruption flourishes and the judicial system remains incapable of providing a stabilizing force. He added: Thousands of Russian soldiers have perished in the Chechen conflict, which has produced uncounted victims among Chechen guerrillas and civilians, made ruins of Chechen cities and villages, and produced thousands of refugees. Billed as an anti-terrorist operation, Mr. Putins continuation of the war amounts to another business venture for Russian generals and their Chechen counterparts. Late last year there was a headline in The Financial Times - System finds best politicians money can buy- over a story by Washington reporter Nancy Dunne, that started as follows: This was the year that the rot in the US political system became so severe that even the voters noticed the smell. .The federal election system has collapsed into a system of organized bribery, says Peter Eisner, managing director of the Center for Public IntegrityMoney is not being raised in support of democracy. It is being raised by corporations and private interests for the purpose of influence. Curbing corruption must become a higher priority for all of us concerned about democracy, human rights and international peace. Russia is drowning in corruption. Ukraines political system is in disarray because its leaders have abused their power for their private gain. Corruption tales are front-page news every day in China. Corruption has felled the governments in Peru and the Philippines in recent weeks. The leaders of Thailand and Indonesia may be the next to fall as corruption allegations rise. In recent years, government leaders in South Korea, India, Greece, and elsewhere have become enmeshed in procurement corruption scandals. In Kenya and Zimbabwe persistent top level corruption is wrecking hope of economic and social progress. In these countries, as in many others, the press is shackled, the judiciary is under attack and its rulers are looting the state. Corruption is the single greatest obstacle to development in Africa. In Pakistan, the trails of influence-peddling and of illicit funds over many years have found their ways to support rogue states and international terrorist movements. In Peru, bribery revelations related spymaster Montesinos has prompted congressional investigator David Waisman to comment in a recent Financial Times report that: The network of corruption in Peru has been greater than in almost any other country in the world in the last 10 years. It has been a plague of locusts and it will take years to dismantle. Meanwhile, in the worlds wealthiest nations the scandals multiply. Japan sees one corruption eruption after another. The Dumas trial in France will reveal a vast network of crime, kickbacks and bribery that reaches into a host of foreign countries and up to the highest levels of French politics. German, Belgian, Italian and Spanish politics have all been soiled by corruption. In the United States, we have just seen the most corrupt election in modern American history. The worlds leading media continues to report in detail on each new corruption story, but rarely pulls all the stories together to see the global dimensions of this phenomenon. It is time that this was done more frequently. Only then will it become increasingly evident that corruption is now a serious threat to global stability. It is destroying public trust in government in dozens of countries. It is damaging respect for the rule of law. Money laundering and corruption are increasingly tied to international organized crime and to terrorist groups. Transparency International In confronting this rampant, destabilizing abuse of power, we have two choices. We can mobilize the marchers, the demonstrators, and the street protesters, on the one hand. And, after all, it has been precisely by such means that the corrupt governments in Yugoslavia, Indonesia, the Philippines and in many other nations have been toppled from power. Or we can seek to forge coalitions at the international and the national levels to bring civil society, government and business under one umbrella to work constructively for institutional reforms. It is this latter path that Transparency International has pioneered and now pursues. Building coalitions Building coalitions is difficult. It takes dedicated, indeed passionate, leadership. In many countries the leaders have to be courageous as they face real physical dangers. From Kenya to Russia, from Colombia to Malaysia, bold and brilliant TI national chapter leaders are championing the anti-corruption cause. Building coalitions means a willingness to partner at times with individuals and organizations that do not share all of the highest ethical standards and perspectives that one would most desire in such a coalition. They join the anti-corruption effort because they perceive it as serving their narrow, perhaps even short-term, self-interest. For example, few if any U.S. corporations actively participating in Transparency International are engaged out of a deep moral concern for the victims of corruption, or because of a determination to promote democracy. They are largely involved because they see our movement as a means to promote their business self-interest. Sometimes we have a mutuality of interest and can work together in a coalition that secures change and improvement. Building coalitions with business can involve risks. Rogue firms sometimes seek to boost their credibility by declaring their membership of Transparency International. However, the risks are worthwhile, so long as all have open eyes and transparently understand the motivations of all partners. The risks are essential, because institutional reform can only be secured if the coalitions are large enough to engage many participants who, for diverse motives, have a common interest in securing a more transparent and less corrupt state. The core of Transparency Internationals approach is the conviction that change can only be stimulated and secured from within countries. It cannot be imposed from outside. The membership of TI-Greece knows the weaknesses of the political system here, the reforms that are most needed, and you alone can develop a meaningful action agenda. You alone can consistently, and with great patience, move your agenda forward. It would be arrogant for outsiders to suggest they know better. For us in the international TI movement, our work is to find every possible way to mobilize international solidarity and support for your efforts. We need to be able to secure experts in specific areas to assist national chapters when you ask for such assistance. We need to be able to mobilize funding at times. We need to strengthen your initiatives by building global public awareness in support of anti-corruption efforts. We need to strive for major new international conventions, regulations and laws that make it far harder for multinational firms to get away with bribing public officials, and that raise the risks to bankers when they launder corrupt money. A Free Press The single greatest cause of corruption, apart from greed, is the belief by public officials that they can easily get away with their crimes. They do not fear exposure and investigation. They believe that their dirty deals can remain secret. They believe that they can wash their stolen fortunes in secret through the global financial system. Thus, the single greatest challenge to their comfort is a free press. When journalists are free to obtain governmental information, to investigate and to publish their findings, then democracy is strengthened. To secure a free press you need, at a minimum, four conditions: first, laws that support freedom of information and minimize official secrecy protection; second, laws that protect journalists from all kinds of intimidation, including vicious libel actions brought by the powerful; third, resources within media organizations to support the training of investigative reporters and the costs of investigations; and fourth, publishers and editors who are not compromised and who totally support anti-corruption investigative approaches by their media enterprises. Regulating the Press Lords Self-censorship of the media by media owners is today, perhaps, the most complex of all the challenges in the anti-corruption area. It is growing rapidly. We see it in many countries where press lords harbor political ambitions of their own and use their TV, radio and print vehicles to promote themselves and, if it is appropriate, to curb public investigation and discussion of corruption. We need go no further than to Italy to find such an example. Then, there are tycoons whose media interests only form a small part of their overall corporate conglomerate businesses. They may be engaged in property development, telecommunications, the expansion of the Internet, in movies and records and a host of other ventures. Many of these ventures depend upon governmental regulation, or licenses, or exemptions from anti-trust regulations. Some of these ventures may directly involve contracts with the state and with parastatal enterprises. And, accordingly, these media owners may have strong vested interests to avoid the investigation of corrupt politicians with whom they may have constant business relationships. So vast are some of these enterprises for example, Rupert Murdochs News Corporation or the new leviathan, AOL-TIME WARNER that they can impose their own standards of non-disclosure and non-investigation on a global basis. At a minimum, at the national and the international levels, we must fight for total transparency in all aspects of corporations that have media interests. We must see in the full light of day all the relationships, interests and potential deals, which corporations with media interests are engaged upon with government be they deals for land development and construction, or deals for special regulatory treatment. We may need new laws. At the same time, we must fight with equal vigor for effective anti-trust regulation to ensure that no single entity becomes so strong that it can assure full protection to corrupt politicians. Political Party Finance In a February 5 Business Week review of a new book by David Kessler on the power of the tobacco industry in America (A Question of Intent published by PublicAffairs), reviewer John Carey writes: Kessler paints a vivid picture of a world where Congressmen read blindly from the tobacco industrys script of lies, where lawyers sell their integrity for a few thousand pieces of silver, and where companies openly brag weve got more money than God, while scheming to boost sales of their killer products. Press freedom will not be possible unless there is transparency in the funding of politics of political parties and election campaigns. There are Americans who claim that the U.S. system is the best, because we have lists of all those who make political contributions and we know how much money is spent and we largely know where it goes. The American system is in danger. Its credibility has been shaken and nobody should be complacent about this situation. Never before in any country on earth has so much private money flowed into the political process with the intent of securing special favors. The recent U.S. elections devoured more than $3 billion of contributions. Do you believe for one moment that when fugitive gangster Marc Rich got his ex-wife and friends to contribute to Bill Clintons various campaigns that he was doing this because of his love of democracy? Do you believe that Philip Morris, General Electric, Microsoft and the other massive contributors to U.S. political campaigns last year were writing checks because of an altruistic passion for freedom of speech and free elections? It is painful as an American citizen to campaign around the world against corruption, while recognizing that my own countrys politicians are now up for sale on a wholesale scale. The battle for campaign finance reform, which is about to get underway in the U.S. Congress, will be difficult. The entrenched vested interests are powerful. Moreover, the efforts that will be waged to secure reform should be seen as just the start of a process to clean up American money politics. There is a danger that there will only be partial reform. The fact is that corporations have become accustomed to paying big sums to secure access to the highest levels of politics in Washington. Kicking the habit will be very tough. Setting an example We must be candid when we seek to wage war on corruption that even the oldest and proudest democracies no longer represent clear and shining examples. Former President Jimmy Carter and many other Americans of high standing and high integrity have influenced wealthy U.S. foundations and the U.S. Agency for International Development, to make a top priority of supporting initiatives to build democracies around the world. Their vital contributions, however, can be undermined by the cash politics that we see in the United States. We have seen, after all, how the weakest and the poorest in American society are shunted aside in a political system that rewards and respects big money. If you want evidence, then I suggest you look at the strange events that took place in the voting in the sunshine state of Florida last November. My concern is all the greater because, as I noted at the outset, I believe corruption is now the greatest source of instability in our world. The people of Indonesia thirst for a decent life of hope and opportunity. Time and again their nations leaders have robbed them. Right now a new political crisis is evolving in one of the worlds most populous nations. Failure to resolve the current corruption crisis in a peaceful and democratic manner would be a terrible tragedy. In Indonesia, as in so many other developing countries, democracy is young and fragile. In many countries today we find that opinion polls show that the great mass of the people view corruption in government as one of the greatest, if not the greatest, national problems. We find that people long to see open and free elections bring honest people to the top of government. And we see from Peru to the Philippines, from Zimbabwe to Pakistan how the trust of the people is abused and their hopes are dashed. The consequences can be dire. We need to fully understand what has happened and what is happening, for example, in Venezuela. Years of corrupt regimes and rigged elections have left the people disenchanted with democracy. Revolutionary Chavez understood this and won election. He is now creating an authoritarian regime. Is this the wave of the future? Is Russia now travelling on a similar path? Is President Putin a friend of democracy and transparent government or an emerging dictator in the long Russian tradition? The jury is still out. But, the decade of transition in the former Soviet Union has been one of democratic hopes dashed, the rule of law mocked, and the emergence of some of the most ruthlessly corrupt businessmen in history. Russias oligarchs have opened a new chapter in the annals of corruption. Never before have such a small number of people become so rich so rapidly through the relentless plunder of state enterprises. The multiple instances of corruption across the world today force clear conclusions. Above all we must ensure that the impact of this rampant disease is not underestimated. We have a duty to build ever-stronger public awareness of how the democratic guarantees of freedom and peace are being ruthlessly undermined by the sordid collaboration of crooked politicians and special individual and corporate interests. All of us must work still harder to build public education in this area. The Rule of Law Just the other day, under the headline Olympic Bribery, a news-wire story from Salt Lake City, Utah, reported: The judging is going to start a year early for the Olympic Winter Games in Salt Lake City, with a pair of committee members hoping to use some fast footwork to skate away from corruption charges A somewhat different story about the courts and corruption appeared in The New York Times under the headline: Vietnam Awash in Graft Trials, but They Dont Clean Up Graft. Reporter Seth Mydans wrote from Ho Chi Minh City that: Just before a huge corruption trial began here this month with 77 defendants, including powerful bankers and business executives, local reporters were taken aside and handed envelopes of cash worth more than a months payit was suggested to the reporters that they limit their articles to narrow accounts of court testimony. Building campaigns against
corruption demands a commitment to securing respect for the law and for
law enforcement. Corruption thrives when judges are bought and public prosecutors
are the pawns of politicians. In scores of countries the system of justice
is itself on trial today. It is important that, whether it
be in the Olympic Games trial now opening in Salt Lake City, or in the
Dumas trial in France, that messages ring forth that the corrupt can be
brought to trial and punished if found guilty. There is assuredly
a need for Transparency International to strengthen its efforts across
its national chapters to campaign in one country after another for greater
transparency in the justice system, for independent judiciaries, for well-resourced
offices of public prosecutors, and for politically independent anti-corruption
agencies.
Public Procurement At the heart of corruption is the ability of government officials and politicians to direct procurement contracts to those who offer the best bribes. The impact is criminal. The determination of procurement awards on the basis of kickbacks means that the public is viciously cheated. We are talking about hundreds of billions of dollars being misallocated year after year across the world. The cumulative impact in terms of reduced economic development and growth is vast. Corruption in public procurement means that suppliers are successful irrespective of the quality of the products and services they offer; that public funds are misdirected from top priorities; that huge inefficiencies develop in the operations of government and in the public services provided. Transparency International has pioneered islands of integrity approaches to establish model public procurement bidding systems. We need to redouble our efforts to get governments, export credit agencies, international organizations like the World Bank, and private financial institutions to work with us to strengthen this approach. Money Laundering Private financial institutions can play a key role in our efforts to curb corruption. They are engaged in financing almost every large-scale public sector procurement deal around the world. They ought to be asking their clients for assurances that the finance is being used for honest purposes. They ought to be working with honest auditing companies to ensure that loans they give to corporations and governments are not used to support the luxurious lifestyles of public officials. Moreover, the auditing firms
need to be prompted to be far more aggressive in this context. They need
to press for far higher enforcement of transparent ethical accounting standards
worldwide. Too often the auditing firms have colluded with corrupt clients
to keep the bribes off the books.
Transparency International initiated a series of discussions with some of the worlds leading banks that resulted last October in a voluntary anti-money laundering agreement. The core of our approach is to convince the banks to build efficient mechanisms to ensure that they know precisely who owns the accounts that they manage. The banks should have systems in place to secure full knowledge of the beneficial ownership of accounts. They should know their customers. When you and I go to a bank to open an account we are asked to give a host of details about ourselves, including passports or official identification data. Why is it that time after time we find out that corrupt leaders have been able to hide behind phony holding companies, shell enterprises and mysterious agents, and so use the largest banks in the world to deposit vast fortunes while hiding their identity from the bankers? Why is it that banks from Cyprus to the Bahamas can deposit massive sums of cash in leading money center banks in London, New York, Frankfurt and Zurich, without questions being asked? After we announced an agreement with the banks, The New York Times ran an editorial under the title: When Tainted Funds Are Banked, which stated in part: Reputable global banks have proved depressingly willing to facilitate the looting of poor nations treasuries by corrupt leaders, counting among their clients such dictators as Ferdinand Marcos of the Philippines and Sani Abacha of Nigeria11 of the worlds biggest banks have joined with Transparency International, the innovative anti-corruption group, to issue a set of know your client guidelines for the institutions private banking units that cater to the wealthy. Transparency International has made a good start in this area, but we have a huge mountain of money laundering to scale. Our efforts must be global. They must seek the fullest cooperation of the banks, the investment firms, the worlds leading insurance companies and the regulators. We can make more progress here. Respecting the Corporation Banks are only one part of the corporate community. As we engage business in our coalition efforts we need to be candid. Business leaders seek respect, above all, from their peers. And businessmen judge each other by profits and revenues, not by ethics. The leading surveys of the worlds most respected corporations give the highest marks to the companies that record the largest profits and sales. The surveys rarely, if ever, contain any questions about business ethics and corruption. But, the more the issue of
corruption is studied, so the more evidence mounts of politically destabilizing
business kickbacks to government officials in return for procurement contracts.
Nobody has good figures on the scale of bribery by international corporations.
The annual volume probably runs into hundreds of billions of dollars. It
is a devastating distortion of global commerce.
Despite the Foreign Corrupt Practices Act, many U.S. firms are engaged in corrupt foreign practices. Enforcement of the U.S. law is inadequate, largely because the function in the U.S. Justice Department is inadequately funded. Efforts have to be made to turn the spotlight on the rather modest results that the Justice Department has achieved in terms of successful prosecutions. Transparency International is assigning high priority to try and ensure the fullest enforcement and compliance with the OECD Anti-Bribery Convention. The majority of the signatory governments are not moving with vigor to build meaningful enforcement apparatus. There is also scant evidence that many leading international corporations in Europe and in Japan are moving into compliance with the new laws. Many corporations do not even know that the OECD Convention exists! No sector of business is more deserving of greater scrutiny at the international level than the arms trade. Our own research suggests that it is the largest sector of international corruption after construction and public works. In view of this we are building a new campaign directed at this the most opaque of all business sectors. As with our initiative in the anti-money laundering area, we hope to be able to engage the defense companies and, in the coalition spirit, find pragmatic initiatives to attack the rampant corruption in global arms sales. Conclusion In Seattle, in November 1999, civil society organizations demonstrated for greater transparency in global trading arrangements. The serious agendas of many of the demonstrators were undermined by the violence in the streets that was created by small numbers of anarchists. This has happened several times since Seattle at major international conferences. But, the violence should not overshadow the concerns of the great numbers of people around the world who are worried about globalization. Their worries are often expressed as anger with what seems to be a conspiracy between powerful governments, powerful international corporations and their tools, the World Trade Organization, the World Bank and the other multilateral economic institutions. I dont hold much with conspiracy theories. I dont see the international agencies as villains, or most corporations as unethical. But, I do believe that some of the fundamental issues of concern about globalization need to be addressed and need to involve Transparency International. Most countries have environmental laws, but in most developing countries and in Eastern Europe these laws are poorly enforced. Bribery of enforcement officials is simply too easy. The result is massive environmental damage. Professor Dan Esty of Yale University, together with the World Economic Forum, have just released the first Environmental Sustainability Index (ESI), which finds that the variable with the strongest correlation to environmental damage is corruption. Match the Transparency International Corruption Perceptions Index and the data gathered for the new ESI and you find that the less corrupt the country, the more likely it is to score well on the ESI. Many countries have labor laws. But, in most developing countries and in Eastern Europe these laws are poorly enforced. Bribery of very poorly paid governmental inspectors is cheap and it is pervasive. And, if one looks at some of the data on human rights gathered by Freedom House, one finds a strong correlation between countries where human rights abuse are large and countries that rank well down on TIs Corruption Perceptions Index. The evidence is overwhelming that in most countries where corruption is seen to be pervasive there is vast environmental damage, there is widespread abuse of human rights, there is press censorship and there is massive economic distress. International investors are avoiding most of these countries, which only adds to the economic distress of the peoples of these countries. The new Globalization Index, produced by A.T. Kearney and Foreign Policy Magazine finds a strong relationship between degree to which a country is part of the global economic system and its ranking on the TI index. The more global the countrys economy, so the higher its clean, non-corrupt ranking, as in the case of such countries as Singapore, Finland and Sweden. And, there is abundant data to show that poverty is greatest and development assistance least effective, in the countries where corruption is most pervasive. The World Bank and other aid agencies are finding, despite their best efforts, that they are largely powerless to confront top ministers and officials about corruption and alter entrenched bribery habits the result is that aid programs fall short of their stated objectives and their potential. As the corruption spreads and deepens, so the human hardship multiplies, the stability of states is called into question and international security is threatened. There is, therefore, enormous reason to redouble efforts to build coalitions that embrace civil society, government and business to challenge corruption in all its manifestations and to build powerful institutions to fight the corrupt. Transparency International is young and at the start of a very long and difficult road. To succeed it will need to grow, to reach out to many potential allies, and to network far more effectively at the national and the international levels. I believe we will succeed and I thank you in TI-Greece for the leadership and the courage that you are providing. Thank you. Please see the Transparency International Corruption Perceptions Index at www.transparency.org. In recent speeches, Frank Vogl highlighted the ethical challenges facing U.S. multinational corporations and used new data from Transparency International to focus, in particular, on global corruption perceptions. The full Transparency International data on a survey on global bribery undertaken by Gallup International can be found at www.transparency.org. Particular interest was shown by the various audiences on:
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