News Archive: January - April 2006

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• Dutch Suspend Almost $US150M In Aid to Kenya. Aid amounting to almost US$150 million to Kenya has been put on hold by the Dutch Government because of corruption in Kenya. The aid was for education and environment programs, according to Voice of America on April 29, 2006.
  
  
• Dr. Devendra Raj Panday, Nepalese Anti-Corruption Activist, Released from Prison. On April 26, 2006 The Hindu reported that Dr. Devendra Raj Panday, former president of Transparency International–Nepal, was among hundreds of political activists who were released as King Gyanendra reinstated Nepal's parliament in a historic political transition. Dr. Panday was imprisoned in late January as part of a crackdown on dissent waged by the king, who seized control of Nepal’s government in Feb. 2005.
  
  
• Hyundai Scandal In Court.  The Korea Times on May 1, 2006 said the president of a Hyundai Automotive Group affiliate testified at a Seoul court Monday that he regularly delivered “slush” funds raised by his company to group chairman Chung Mong-koo. Chairman Chung was arrested last Friday on charges of embezzlement and breach of trust.
  
  
• Pension Funds Sign Pact to Ensure Ethical Investment. On April 26, 2006 the Financial Times reported that 32 pension funds from six continents and worth more than US $2,000bn will sign six “Principles for Responsible Investment,” the first global charter placing environmental, social and governance (ESG) standards at the core of their investment strategies. Aiming to commence a fundamental shift from short-term to long-term considerations, the principles include vows to incorporate ESG standards into investment analysis, active engagement with companies, demands for ESG disclosure and co-operative action.
  
  
• Politics, Ethics, Oil Prices: America's major newspapers carried front page stories on April 27, 2006 that Republicans and Democrats in the US Senate have called on the Internal Revenue Service to audit the accounts of the top 15 oil companies. Ethical questions are being asked. The politicians are reacting to concerned citizens who are placing blame on Washington as they fill up their cars with ever more expensive fuel. Controversy has been heightened by reports of very large pay to top oil industry executives. Congressional hearings and oil company PR defensive campaigns are being prepared as serious campaigning for November's Congressional elections loom. (For more on oil profits and ethics see our report on Exxon Mobil in Corporate Reputation).
  
  
• UPDATE, April 27, 2006: UnitedHealth Agrees to Change Corporate Governance Policies. The board also agreed to review recommendations including terminating further equity-based awards for some of its senior executives who posess large numbers of stock options alread as well as eliminiating noncash forms of payment (Wall Street Journal)
  
  
• Calpers Puts Pressure on UnitedHealth to Disclose Compensation. On April 26, 2006 The Wall Street Journal reported that the California Public Employee's Retirement System is demanding a conference call with the compensation committee of the board of UnitedHealth Group Inc. over its disclosure practices with regard to stock options and is threatening to withold votes for board directors seeking re-election. UnitedHealth's CEO, William McGuire currently holds $1.6 billion worth of gains which the company maintains is the result of extraordinary stock price appreciation over the past several year.
  
  
• Oil Industry Corruption Crippling Iraq Economy. On April 26, 2006 the Associated Press reported that a recent report prepared by the Inspector General of Iraq’s Oil ministry concludes that corruption and smuggling, combined with frequent attacks on oil pipelines in the north by insurgents, have prevented Iraq from rebuilding its battered oil infrastructure and now constitute the biggest threat to the country’s economy. The report said the only solution is an urgent crackdown by Iraq's government.
  
  
• Questionable Corporate Governance. CalPERS (the California Public Employees' Retirement System), America’s largest pension fund with assets of more than $208 billion, in an annual review of corporate governance has asserted that six major corporations have been placed on its annual Focus List for poor stock market and corporate governance performance. The Focus List, published on April 19, 2006, singled out Cardinal Health, Clear Channel Communications, Mellon Financial, Brocade Communications,OfficeMax, and Sovereign Bancorp (for a discussion of the Focus List see Corporate Governance Surveys and Trends).
  
  
• Former Computer Associates CEO Pleads Guilty to Fraud. On April 25, 2006 the Financial Times reported that the former chief executive officer of Computer Associates (CA) pleaded guilty to charges that he engineered a $2.2bn accounting fraud at the software group and then tried to cover up his crime. His admission brings to an end a long-running investigation into Mr Kumar's involvement in an "35-day month" accounting scheme that CA used between 1998 and 2001 to extend financial reporting periods in order to beef up company revenues.
  
  
• Boeing and US Nearing Deal on Two Probes, Disagreement Over Fines. On April 25, 2006 Reuters reported that Boeing Co. and U.S. prosecutors have reached a preliminary agreement to resolve two criminal investigations. According to the article, the aircraft company, while having signaled its willingness to pay about $500 million to simultaneously settle related civil claims, is resisting federal calls for about $750 million in fines and penalties as part of a settlement, as reported by the Wall Street Journal last week. The investigations involve allegations Boeing improperly acquired proprietary documents from a rival and illegally recruited a U.S. Air Force acquisition official while she still had oversight of billions of dollars in other Boeing contracts.
  
  
• Former Enron Chairman Ken Lay to Testify This Week. On April 24, 2006 the Houston Chronicle reported that Enron Founder and Former Chairman, Kenneth Lay, began his testimony at his own trial for fraud and conspiracy today. Former CEO Jeffrey Skilling finished his testimony in the same trial on April 20.
  
  
• Top Democrat Leaves House Ethics Committee. On April 23, 2006 the Chicago Tribune reported that the top Democrat on the US House of Representatives ethics committee, Representative Alan Mollohan of West Virgina, agreed to leave the panel in order to defend his financial conduct. He faces accusations that he used his congressional position to funnel millions of dollars to home-state foundations, possibly enriching himself. He denies the charges.
  
  
• Phillipine Supreme Court Strikes Down Arroyo Order. On April 21, 2006 Reuters reported that the Philippine Supreme Court opened President Gloria Macapagal Arroyo to renewed political attacks and corruption accusations, by striking down her executive order, EO 464, that had barred officials from conducting inquiries. Arroyo, who has survived the desertion of allies and an impeachment attempt, signed the order in late September 2005 as both houses of Congress began investigations into allegations of vote-rigging and corruption against her.
  
  
• Brazilian Senators Push for Corruption Inquiry. On April 21, 2006 the Financial Times reported that opposition leaders in Brazil’s Senate submitted a request signed by 34 senators (more than the minimum 27 required) for the creation of an investigation into corruption allegations concerning family members and close acquaintances of President Lula da Silva. According to the article, the request is an effort to keep alive the corruption scandal in which leaders of Mr. Da Silva’s Workers’ Party were accused of vote buying and illegal campaign finance. Recently, there have been increasing signs that many of those accused will go unpunished and the government will emerge unhurt from the general elections next October
  
  
• JPMorgan to Pay US $425 mln to Settle IPO Fraud Suits. On April 20, 2006 Reuters reported that JPMorgan Chase & Co., one of many investment banks sued for rigging initial public offerings during the 1990s US bull market, confirmed it agreed in principle to pay $425 million to settle its portion of the case. The agreement is subject to approval by investors represented by the class action lawsuit and by two judges presiding over the case in a New York federal court. Dozens of Wall Street underwriters were sued by investors after technology stocks went public and soared during the 1990s bull market, only to implode starting in 2000.
  
  
• Hyundai Pledges $1bn Charity Donation Amid Scandal. On April 20, 2006 the BBC reported that Hyundai Chairman, Chun Mong-Koo, and his son would donate US $1bn of personal assets to South-Korean charities. According to the article, the donation is an apparent attempt to assuage public outrage over a recent bribery scandal in which the South Korean car-maker allegedly used slush funds to illegally win business favors from the government.
  
  
• Top BaFin Officer Admits to Taking Bribes. On April 20, 2006 Bloomberg reported that the head of IT of Germany’s chief financial regulator, BaFin, confessed to taking approximately 2.6 million Euros worth of bribes. According to the article, while the affair has no impact on BaFin’s core regulatory work, the fact that the official, who has been arrested on charges of bribery and breach of fiduciary duty, was able to illegally divert funds unnoticed for over two years, is highly embarrassing for BaFin and detrimental to its image. 
  
  
• U.S. Contractor Admits Bribery For Jobs in Iraq. On April 19, 2006 the Washington Post reported that Philip H. Bloom, a US businessman who is at the heart of one of the biggest corruption cases to emerge from the reconstruction of Iraq has pleaded guilty to conspiracy, bribery and money-laundering charges. According to the article, Mr. Bloom admitted his part in a scheme to give more than $2 million in cash and gifts to U.S. officials in exchange for their help in getting reconstruction contracts for his companies. Bloom's firms won $8.6 million in reconstruction deals, with an average profit margin of more than 25 percent.
  
  
• Massive Fraud Hits Tsunami Aid. On April 16, 2006 the Sunday Times reported that the Aceh Anti-Corruption Movement announced that 30% to 40% of all the tsunami aid funds, Indonesian and international, have been tainted by graft and that the Indonesian government is largely to blame for the slow recovery process. According to the article, two British charities, Oxfam and Save the Children, have lost thousands of dollars due to phony building contractors, forcing them to suspend key housing projects.
  
  
  
  • US Freddie Mac Pays Record Fine for Illegal Political Contributions. On April 19, 2006 the Associated Press reported that the US home loan giant Freddie Mac has agreed to pay a record $3.8 million fine to settle the US Federal Election Commission’s allegations that it illegally used corporate resources between 2000 and 2003 for 85 fund-raisers that collected about $1.7 million for federal candidates. Much of the fund-raising benefited members of the House Financial Services Committee, a panel whose decisions can affect Freddie Mac.
    
    
  • Australia PM Testifies at Corruption Hearing. On April 13, 2006 The Age, Australia reported that John Howard, Australian prime minister, testifying at an official government inquiry, denied reading any “hard evidence” indicating that the AWB, Australia’s monopoly wheat exporter, could be paying bribes to Saddam Hussein’s Iraqi regime to obtain business and circumvent the UN's oil-for-food program. The inquiry was launched after a United Nations report last year accused AWB of paying an estimated A$300m in kickbacks to the Saddam regime.
    
    
  • Wolfowitz Strengthens World Bank Anti-Corruption Strategy. On April 12, 2006 Reuters reported that World Bank President, Paul Wolfowitz, announced plans to use additional funds and staff, including locally-based anti-graft teams, to strengthen anti-corruption efforts. He also said the Bank will increase funding in such areas as freedom of information and judicial and civil service reform. He said he is encouraging a common strategy for blacklisting and publishing the names of corrupt firms among all development banks.
    
    
  • Freeport Executives Cash in $130m in Options. On April 11, 2006 the Financial Times reported that the two top executives at the mining company, Freeport-McMoRan, have cashed in over US $130m worth of stock options following 2005 executive compensation packages totaling $77.3 million. The company, whose main asset is its Grasberg mine, located in Papua, Indonesia, has recently faced protests from Papua locals and Indonesian politicians over its distribution of revenues and alleged human rights abuses.
    
    
  • UPDATE: Jury Orders Merck to Pay $9 Million in Punitive Damages.
    Merck Loses $4.5m Vioxx Case. On April 6, 2006 the Financial Times reported that a US New Jersey court ordered the pharmaceutical company Merck to pay $4.5m to a man who blamed the maker of pain killer Vioxx for his heart attack, but nothing to a second plaintiff who also sued the company. The case was the first that involved patients who took Vioxx for 18 months or longer, the period that Merck’s own study indicated placed patients at a significantly increased risk of heart complications
    
    
  • Skilling to Take the Stand in Key Enron Testimony. On April 10, 2006 The New York Timesreported that Jeffrey Skilling, the former CEO of the collapsed energy giant, Enron, testified at his own trial. Skilling, who has been charged with 28 counts of conspiracy, fraud and insider trading, insisted that he is "absolutely innocent". Kenneth L. Lay, Enron’s former Chairman, who is being tried with Mr. Skilling is charged with six counts of fraud and conspiracy and is expected to take the stand as soon as the end of April.
    
    
  • Australian Trade Minister Denies Seeing Iraq Kickbacks Memos. On April 11, 2006 The Financial Times reported that Australia's Trade Minister, Mark Vaile, testified before the Australian government-commissioned Cole Inquiry into the Iraq Oil-for-Food scandal. Vaile said that he had not seen any of the 21 diplomatic cables sent to his office describing the over A$300m in kickbacks paid by the Australian Wheat Board to Saddam Hussein's government in Iraq.
    
    
  • TI Calls on Western Governments to Change Banking Laws. On April 8, 2006 the BBC reported that in a declaration adopted at their meeting in Kenya, Transparency International representatives made an appeal to western governments to change their banking laws in order to make it easier to repatriate the estimated $140 bn of illegally acquired wealth that leaves Africa annually. Citing the ease with which stolen money can be invested in countries such as the UK, the representatives said that it was not only illegal, but immoral, that so much wealth stolen from Africa was allowed to circulate freely in the world's wealthiest nations
    
    
  • Pakistan’s Anti Corruption Bureau Links Former PM to UN Oil-for-Food Scandal. On April 7, 2006 The Daily Times reported that Pakistan's anti-corruption bureau alleged that former Prime Minister Benazir Bhutto gave a two million commission to the regime of Saddam Hussein to win contracts worth US $115 million through two companies she registered in 2000 and 2001. The bureau also released documents linking Bhutto to international companies involved in the scam and confronting prosecution in their countries.
    
    
  • WB Postpones Funding Indian Health Program On Corruption Claims. On April 6, 2006 the World Bank announced that it will suspend funding for a second phase of the Reproductive and Child Health Program program in India and two other health sector loans, citing evidence of possible fraud and corruption in the procurement of pharmaceuticals. According to the Bank, the decision was made to allow more time for discussion between the Bank and the Indian government on the most effective ways to address issues of fraud.
    
    
  • French Authorities Open Oil-For-Food Corruption Probe. On April 5, 2006 the Associated Press reported that Paris prosecutors have opened an investigation into suspected corruption by French companies involved in the U.N. oil-for-food program with Iraq. An independent panel, led by former U.S. Federal Reserve chairman Paul Volcker, accused 2,200 companies from around the world, 172 of them French, of conspiring with Saddam Hussein's regime to defraud the U.N. oil-for-food program in Iraq of $1.8 billion. According to the article, investigators will initially limit the probe to companies that paid surcharges on humanitarian contracts for trucks, medical equipment and other materials.
    
    
  • McDonalds and Southern Co. Adopt Political Transparency Guidelines. On April 5, 2006 The Center for Political Accountability reported that McDonald’s and Southern Co. have joined Morgan Stanley, Johnson & Johnson, Schering-Plough, Pepsico, Coca Cola, Eli Lilly, Bristol- Myers Squibb and Staples by adopting policies requiring their directors to oversee soft money political contributions made with corporate funds. Over the past sixteen months, in addition to director oversight, each company has also agreed to post a complete list of corporate political contributions on its website and disclose the guidelines for their political giving.
    
  • Coca-Cola Company Announces New Compensation Plan for Directors. The Coca-Cola Company said today it is adopting a new compensation plan for its Board of Directors consisting entirely of equity-based remuneration payable only when the Company meets defined performance targets. The company claims this will more closely tie its Directors' interests with those of its shareholders.
    
    
  • Thai Prime Minister Resigns Following Corruption Protests. On April 4, 2006 the Bangkok Post reported that, following weeks of corruption allegations, Thai Prime Minister Thaksin Shinawatra announced that, in order to “re-unite” the country, he will not accept premiership in the upcoming formation of a new government. The announcement came only two days after a snap election failed to resolve the month long political crisis which has overtaken the country.
    
    

  • Vietnamese Transport Minister Resigns. On April 4, 2006 Thahn Nien Daily reported that Vietnamese Transport Minister Dao Dinh Binh resigned amid a growing corruption scandal involving an allegedly corrupt state firm, Project Management Unit 18 (PMU18). Officials within PMU18 are accused of stealing about $7 million of state road and bridge construction funds to spend on football gambling.

  • Report Implicates 100 People in Brazilian Corruption Scandal, Clears Da Silva. On March 30, 2006 the BBC reported that, according to a newly released Brazilian parliamentary report, more than 100 people, including Members of Parliament and two former government ministers, should face criminal charges for corruption. The report, which is the result of nine-month parliamentary investigation into a national corruption scandal, clears President Luiz Inacio Lula da Silva of criminal wrongdoing.

  • US Senate Approves Lobbying Reform Bill. On March 30, 2006 the Washington Post reported that the US Senate approved a much anticipated lobbying reform bill. The law would for the first time require lobbyists to disclose indirect lobbying and would prohibit the giving of gifts and meals to lawmakers. According to the article, the bill, which focuses on greater disclosure rather than tougher enforcement and does not include the creation of an independent ethics body, is far less sweeping than many Republicans had hoped.

  • UPDATE, MARCH 30, 2006: MULLEI FORMALLY RESIGNS.
    Kenyan Central Bank Governor Charged with Corruption. On March 24, 2006 the Kenya Times reported that Kenya's anti-corruption court has charged Andrew Mullei, the country's central bank governor, with nepotism for hiring four people, one of whom was his son, as consultants to Kenya's reserve bank without appropriate process. The charges come in the midst of two major national corruption scandals. Mullei denies the allegations and has been released on bail.

  • CEO Pay Increase Slows to 11.29 Percent. On March 20, 2006 The Corporate Library reported that, according to the preliminary findings from its Executive Compensation Database, and looking at the 554 proxies that have been filed since the beginning of July 2005, total compensation went up by a median of 11.29 in 20005 for small, medium and large publicly listed U.S. companies, compared to a median raise of 30.15 from the previous survey. The gain at the 500 largest companies only equaled an average raise of 3.66 percent.

  • Three Former Bolivian Presidents Face Charges. On March 20, 2006 the BBC reported that Bolivia's attorney general is seeking to put three former presidents, Carlos Mesa, Gonzalo Sanchez de Lozada, Jorge Quiroga, and Eduardo Rodriguez, on trial for allegedly making unconstitutional deals with foreign oil companies.

  • Three Major US Companies Adopt New Political Contribution Policies. On March 20, 2006 the Center for Political Accountability (CPA) announced that Bristol-Myers Squibb and Staples have agreed to a new set of accountability guidelines in which the companies would disclose and have their directors annually oversee soft money political contributions made with corporate funds. They join Morgan Stanley Johnson & Johnson, Schering-Plough, Pepsico, Coca Cola and Eli Lilly,which adopted political transparency and accountability policies during the 2005 shareholder resolution season. In addition, the CPA reported, Amgen became the first company whose board of directors endorsed a shareholder resolution calling for disclosure and board oversight of the company’s soft money giving. Current campaign finance laws do not require companies to disclose political contributions made with corporate funds.
    
    
  • Russia Ratifies UN Convention Against Corruption. On March 20, 2006 Itar-Tass reported that Russian President Vladimir Putin signed a federal law ratifying the UN Convention against Corruption.

    Zurich American Insurance Agrees to Settlement in US Price-Fixing Suit. On March 20, 2006 The New York Times reported that Zurich American Insurance Company, a unit of the Swiss insurer Zurich Financial, agreed to pay $171.7 million in cash to settle allegations of commercial insurance price-fixing and bid-rigging with Texas and eight other states. Zurich American is the first of 25 insurers and brokers to settle the lawsuit in Federal Court.

  • Report Shows Australian Government Knew About Iraq Bribes. On March 16, 2006 The Australian reported that government spy agencies have know for eight years that a trucking company that channeled money to Iraq for the Australian wheat company AWB was partly owned by Saddam Hussein’s regime. According to a report by the Cole Inquiry, the trucking company violated UN sanctions and received bribes for wheat purchased under the UN oil-for-food program, money that went directly to Hussein’s government. This information is said to Prime Minister John Howard's former statements about how much the government knew about the bribes.

  • UK Labour Party Admits £10 Million More in Secret Loans. On March 17, 2006 The Times reported that Britain’s ruling Labour Party confirmed that it had received almost £14 million in secret loans from individual supporters last year - £10 million more than it had previously admitted. According to the Times, this came to light when Jack Dromey, a union leader who is the Labour Party treasurer, launched an internal inquiry after revealing he had not been informed about the money. Mr Blair confirmed that he had been aware that the party was borrowing large sums from individual supporters.

  • Corruption Concerns Stop Tsunami Aid. On March 16, 2006 Oxfam, a major international charity group, announced that is has suspended house-building and some job support operations in the tsunami-devastated Aceh region of Indonesia in order to conduct auditing reviews. The decision came after it’s regular monitoring processes found “financial irregularities.” While Oxfam has not stated a number, international media reports suggest that tens of thousands of dollars are missing.

  • Romania's Former PM, Chamber of Deputies Speaker Resigns. On March 15, 2006 Mediafax reported that Romania's former Prime Minister, Adrian Nastase, said he had resigned from his positions of Speaker of the Chamber of Deputies and head of the country's leading opposition party, after prosecutors charged him with corruption in January over questionable property deals. Nastase is the highest-ranking Romanian official investigated by anti-corruption prosecutors, an effort in concordance with the European Union's mandate that the country address its corruption problem prior to its accession in 2007 or 2008.

  • Bolivian President Drafts New Anti-Corruption Law. On March 14, 2006 La Prensa Latina reported that Bolivian President, Evo Morales, announced his plans to submit a new law to Congress this week that will establish a special jurisdiction for crimes of corruption and illegal enrichment. According to Morales, the law will name rigorously selected judges, policemen and other experts exclusively devoted to fighting corruption

  • UN Report Shows Improvements In Africa's Financial Management and Accountability. On March 9, 2006 the UN Economic Commission for Africa released a report on the perceptions of governance in Africa, the result of a three year survey (2001-2004) in which 27 countries were surveyed. Among other things, the report found that while corruption and tax evasion persists, a stronger commitment to medium-term expenditure frameworks across the continent has led to progress in public financial management and corporate accountability. It also found that private and public partnerships are growing, allowing for stronger efficiency and transparency in the delivery of public services.

  • European Commission to Side with Business on CSR Initiative. On March 13, 2006 The Financial Times reported that the the European Commission plans to side with business in largely excluding trade unions and non-governmental groups from a new European corporate social responsibility initiative, "The European Alliance for CSR," to be launched March 22. Günter Verheugen, EU industry commissioner, confirmed that the Commission had moved towards a pro-business view on CSR over the past year, abandoning its initial plans to increase regulations and monitoring
    
    

  • NGO Report Reveals High Levels of Fraud in Brazil’s Diamond Industry. On March 12, 2005 the Partnership Africa Canada (PAC), in a recent investigative report, called for investigations into alleged widespread fraud in the Kimberley Process (KP), the UN-backed certification program set up in 2000, originally for the purpose of limiting the trade in "conflict diamonds" that fed civil wars in Africa. PAC concludes that half of Brazil’s diamond production comes from falsified or highly dubious sources and that one in two Brazilian Kimberly certificates are probably untrue, which, it warns, is largely due to the leniency of Brazil’s diamond certification system.

  • Italian Bid for Prime Minister's Corruption Trial. On March 10, 2006 the BBC reported that Italian prosecutors have indicted Prime Minister Silvio Berlusconi and UK lawyer David Mills on corruption charges. It is alleged Mr Mills, who is married to UK Culture Minister Tessa Jowell, and was a lawyer for Mr Berlusconi in the 1990s, received a gift of US $600,000 from Berlusconi in 1997 as payment for not revealing details of the prime minister's media empire, Mediaset. In a separate case, Mr Berlusconi, Mr Mills and 12 others are accused of tax fraud and embezzlement involving Mediaset. Both men deny the allegations, which came after an 18-month investigation and come weeks before the April 9 Italian general elections.

  • IMF Delays Loans to Kenya Amidst Corruption Scandal. On March 10, 2006 the Financial Times reported that donor concerns over allegations of high-level corruption have caused the International Monetary Fund to put its already delayed Kenyan program on hold for several months, according to an IMF official. The IMF's board was due to meet last month to discuss the third disbursement of a three-year, US $327m program for the east African nation. But the meeting was called off after it became clear the fund's members would not have approved the $72m loan following fresh corruption allegations, said Jurgen Reitmaier, the IMF's resident representative.

  • UN Reports Corruption Deprives Poor of Water. On March 10, 2006 CNN reported that the UN released a report entitled, “Water: A Crisis of Governance.” The report stated that while supplies of fresh water are adequate for the whole planet, mismanagement in its distribution helps explain why adequate drinking water is beyond the reach of 1.1 billion people, while 2.6 billion people lack access to basic sanitation. According to the report, which was prepared for the Fourth World Water Forum opening in Mexico opening in Mexico City on March 22, those affected are among the world's poorest, and over half of them live in China or India. The diversion of millions of dollars every year slows economic growth, discourages investment in water systems and leads to inefficient and unfair distribution of water resources in many countries, it said.

  • Testimony by Former Enron CFO Implicates Old Bosses. Newspapers across the US (for example, The Washington Post) reported on March 8, 2006 that former Enron Chief Financial Officer Andrew Fastow testified that schemes designed to illegally hide hundreds of millions of dollars of losses at Enron were fully approved by former Enron CEO, Jeffrey Skillings, who is on trial and who has claimed ignorance of Fastow’s admitted crimes.

  • Shareholder Suit Contests Pay Package of Hewlett-Packard Ex-Chief. On March 8, 2006 the New York Times reported that two large shareholders sued Hewlett-Packard on Tuesday, contending that a $21.4 million severance package for Carleton S. Fiorina, its former chief executive, violated the company's policy on executive compensation. The suit says Ms. Fiorina's severance pay exceeded a limit shareholders approved in 2003 that restricted such compensation to 2.99 times an executive's base pay plus bonus. The lawsuit seeks to recover the money paid to Ms. Fiorina, who was forced to resign in February 2005. The suit, filed in Federal District Court in San Francisco by the pension funds of the Indiana Electrical Workers union and the Service Employees International Union, is the latest example of shareholders trying to limit executive compensation.

  • German Carmaker DaimlerChrysler Admits to Bribing Public Officials. On March 7, 2006 the Financial Times reported that, after an 18 month internal investigation, DaimlerChrysler announced that "several" employees have been fired or suspended over bribes payed "primarily" in eastern Europe, Africa and Asia over the last 12 years. The payments, it said, could violate both German law and the Foreign Corrupt Practices Act in the United States. The admission comes as German prosecutors open an investigation into the company's conduct and in the midst of an ongoing US probe into allegations that Daimler maintained multi-million dollar slush funds for bribery.

  • Former U.S. Congressmen Receives Record Prison Sentence in Bribery Case. On March 5, 2006 the New York Times reported that former Congressman, Randy Cunningham, has been sentenced in U.S. District Court to eight years and four months in prison for taking $2.4 million in bribes from military contractors. Cunningham pled guilty to corruption charges after resigning from Congress last November. The U.S. government, which called the misconduct unprecedented for its "depth, breadth and length," said the sentence was the longest ever handed down for a member or former member of Congress in a federal corruption case

  • Jump in US Profit Restatements Shows Sarbanes-Oxley Taking Root. On March 3, 2006 the Wall Street Journal reported that restatements of financial results by US public companies nearly doubled in 2005 as auditors drilled deeper into corporate accounts, in part because of a sharper focus on requirements laid out by the Sarbanes-Oxley corporate-governance act. According to the article, the rise could signal that financial-reporting changes made in the wake of the Enron and WorldCom scandals are working. Although restatements signal that management and auditors have missed problems and can lead to short-term swings in a company's share price, they also give investors a truer picture of a company's finances.
    
  • Kenya Admits Armed Raids on Paper. On March, 2, 2006 the BBC reported that the Kenyan government has confirmed it ordered police to raid the offices of the Standard newspaper and its sister station, the Kenya Television Network. Thousands of copies of the paper were burned, but the TV station is now back on air after being shut down for hours. The newspaper, which the government has repeatedly accused of fabricating stories, has been critical of President Mwai Kibaki's handling of recent corruption scandals. Earlier this week, the government arrested three Standard journalists for publishing stories critical of the President’s involvement in a corruption scandal.
    
    

  • Volkswagen Board Divided Over CEO's Future. On March 1, 2006 the Wall Street Journal reported that the chairman of Volkswagen’s supervisory board, Ferdinand Piëch, said it is an "open issue" whether the contract of Chief Executive Bernd Pischetsrieder will be extended. According to the article, Mr. Piëch said that while he will vote to extend Mr. Pischetsrieder’s contract, the extension may face opposition from the labor representatives who hold half of the board's 20 seats. Piëch and Pischetsrieder clashed recently in a dispute over the appointment of a union leader to a management position, which Piëch and labor representatives supported. In recent months, Mr. Piëch has come under criticism for what some see as a conflict of interest stemming from his dual roles at Volkswagen and sports-car maker Porsche, which last fall paid €3.5 billion to acquire an 18.5% stake in Volkswagen. Besides leading Volkswagen's supervisory board, Mr. Piëch is a major Porsche shareholder.

  • Parmalat CEO Testifies at Milan Trial. On February 28, 2006 ANSA reported that according to CEO Enrico Bondi, Parmalat’s creditors "without a doubt" knew about the dairy multinational's true financial crisis well before its collapse at the end of 2003 and helped float the company's bonds despite its inability to pay them. Bondi testified at a Parmalat trial in Milan, in which former CEO Calisto Tanzi and 15 other executives, banks and accounting firms are being tried for crimes involving the stock market, including market rigging, providing false accounts and misleading stock market regulators.
    
    

  • Anti-corruption Campaign Intensifies In Cameroon. On February 28, 2006 Voice of America reported that the war against corruption in Cameroon has intensified over the last week. On February 24 President Paul Biya dismissed his water and energy minister, Alphonse Siyam Siewe. Three days earlier, three senior officials were detained and charged with corruption and embezzlement. According to the article, experts believe that the recent anti-corruption drive is most likely the result of recent pressure from the international community, the Bretton Woods Institutions in particular, to tackle corruption. Earlier this month, officials from the International Monetary Fund warned Cameroon that it must make more progress in tackling graft before it can qualify for the Heavily Indebted Poor Countries debt relief programme.

  • Exxon Faces Dilemma on Chad Project. On February 28, 2006  the Wall Street Journal reported that Exxon Mobil Corp. is currently caught in the middle of a fight between the government of Chad and the World Bank as it decides what to do with $50 million of oil royalty owed to Chad by an Exxon-led consortium. In the late 1990s, Exxon Mobil, the World Bank and Chad agreed to a unique deal, aimed at preventing corruption, in which the World Bank mandated that revenue from the pipeline go to an escrow account to be used almost entirely for the construction of schools, roads, health care systems, and other development projects. However, Chad's Parliament recently loosened the spending restrictions, and the World Bank froze the account. According to the article, Exxon has two choices: hold back the money, which could lead Chad's government to shut down production at the company's operations there, or hand it over, and risk angering the World Bank and nongovernmental-agency activists.

  • UN Special Representative Calls for Clearer Human Rights Standards in Business. On February 28, the Financial Times reported that, coinciding with this week’s publication of his interim report on corporate human rights responsibilities, Professor John Ruggie of Harvard University said that the latest controversy US tech compliance with Chinese censorship authorities is evidence of the need for clearer UN human rights standards for businesses tailored to the issues of individual sectors. Prof. Ruggie was appointed last year by UN Secretary General, Kofi Annan, to end a stalemate between many businesses and human rights activists over a 2003 UN set of draft rules on corporate human rights duties. “What the norms have done is to take existing state-based human rights instruments and simply assert that many of their provisions now are binding on corporations as well,” he writes. “But that assertion itself has little authoritative basis in international law.” Prof. Ruggie is scheduled to present his final report to the UN next year.

  • U.S. Army Cedes to Halliburton on Costs. On February 26, 2006 The New York Times reported that the U.S. Army has decided to reimburse a Halliburton subsidiary, KBR, for nearly all of its costs on a disputed $2.41 billion no-bid contract to deliver fuel and repair oil equipment in Iraq, even though the Pentagon's own auditors had identified more than $250 million in charges as potentially excessive or unjustified. The U.S. Army Corps of Engineers, overruling the bulk of the auditors' objections, awarded the company nearly $57 million in bonuses for those assignments. Those bonuses more than doubled the profits the company was guaranteed under the cost-plus contract, Corps of Engineers figures show. The Corps of Engineers awarded KBR the Restore Iraqi Oil (RIO) contract in March 2003, just before the U.S.-led invasion of Iraq. But when the Pentagon revealed it had awarded what would become a $2.4 billion contract to Vice President Dick Cheney's former employer without seeking bids from competitors, the contract quickly came under attack. 

  • UN Secretary-General Appoints Tunku Abdul Aziz of Malaysia as Special Adviser on Establishment of UN Ethics Office. On February 23, 2006 the United Nations announced the appointment of Tunku Abdul Aziz of Malaysia as the Special Adviser on the Establishment of the Ethics Office, which was effective February 16. Mr. Aziz is the founder and former president of the Malaysian Chapter of Transparency International (TI) and Vice-Chairman of TI’s Board of Directors. According to the UN, he will advise on the set-up of the Ethics Office and its operating procedures, as well as on the process of recruiting the regular staff members. At present, there is an interim team of seconded United Nations staff members.

  • Contractor Who Bribed US Congressman Pleads Guilty. A key figure involved in a broadening U.S. Justice Department bribery investigation of members of Congress and the Defense Department agreed to plead guilty and provide crucial evidence. The Washington Post reported on February 25, 2006 that defense contractor Mitchell J. Wade admitted paying bribes to convicted Congressman Randy Cunningham, to bribing Defense Department officials and to making illegal campaign contributions to two Republican members of Congress in order to win business.

  • For Ken Lay, Enron's Riches Turning to Ruin. As the Enron trial proceeds with the first prosecution witnesses in Houston, Texas, The New York Times reported on February 26, 2006 that former CEO Keneth Lay faces financial ruin. An investigation by the newspaper said Lay had enormous debts and dwindling assets. It reported that his net worth is now less than one million dollars and, “Mr. Lay has already spent $25 million on his defense and expects to spend close to $30 million in total.” He also faces multiple civil suits seeking cash from him that are being brought by former Enron employees.
    
    

  • Fannie Mae Probe Singles Out Two Executives, “Culture of Arrogance.” A 2,500 page report by former Senator Rudman details abuse at America's largest home finance company. On February 24, 2006 the AP reported that the independent report found that Fannie Mae's former finance chief and controller share primary responsibility for the accounting failures at the mortgage company. The report found far-reaching ethics failures and Board governance weaknesses that failed to prevent an $11 billion accounting scandal.

  • UPDATE: Thailand's President Thaksin refused to resign amid growing pressures, but on February 24, 2006 he asked the King to dissolve Parliament and call for early elections.
    Thai Court Rejects Call to Impeach PM Over Share Dealings. On February 16, 2006 the Bangkok Post reported that Thailand’s Constitution Court ruled 8-6 to reject a petition from senators seeking the disqualification of Prime Minister Thaksin Shinawatra for violation of the country’s “conflict of interest” law. (Media reports revealed that Parliament passed laws allowing foreign ownership of Thai communications firms and involving other special concessions just before Thaskin's family sold its stake in telecom company, Shin Corpopration to investors in Singapore in a complex deal involving offshore firms - the deal was structured so that no taxes would be paid).
    
    
  • Health South to Pay US$445m to Settle Suit. On February 24, 2006 the Financial Times reported that HealthSouth has agreed to pay $445m to settle an investor lawsuit resulting from a multi-billion dollar accounting fraud at the US healthcare company. Richard Scrushy, the company’s founder and former chief executive, was last year found not guilty of involvement but 15 other executives pleaded guilty to charges.
    
    
  • Google Rejects US Data Demand. On Feburary 21, 2006 the BBC reported that Google has formally rejected an official demand from the US government to hand over a week's worth of search records, arguing that doing so would violate the privacy of its users and reveal trade secrets.
    
    
  • Key hearing in US Congress on Internet firms accepting Chinese censorship - On February 17, 2006 a hearing raised the possibility of legislation as Google, Microsoft, Yahoo and Cisco were criticized for putting profits above ethics in working with China's censors - see our EthicsWorld report at Business and Politics.
    
    
  • KPMG Auditors Settle Charges Over Inflated Xerox Profits. On February 23, 2006 The Washington Post reported that four former and current KPMG LLP accountants have agreed to settle civil charges that they helped Xerox Corp. engage in a multibillion-dollar scheme to manipulate earnings over four years, according to the Securities and Exchange Commission. Two of the settlements are for US$150,000, the largest fines ever imposed by the SEC against individual auditors.
    
    
  • Arbitrator in Citigroup Case Accused of Conflicts of Interest. On February 23, 2006 The New York Times reported that a WorldCom shareholder, who lost a $900 million securities arbitration against Citigroup in November, is asking a federal judge to overturn the decision because an arbitrator overseeing the matter failed to disclose significant relationships and past incidents that should have disqualified.
    
    
  • Federal Jury Clears Merck in Death of Vioxx Patient. On February 17, 2006 the AP reported that federal jury handed the drug maker Merck a major victory, clearing it of any responsibility in the death of a 53-year-old Florida man who had a heart attack after taking its once-popular painkiller Vioxx for less than a month. This was the second court victory for Merck, and the first in a federal court. The company had argued in this case that the plaintiff's lawyers never proved any link between Vioxx and the heart attack that Richard Irvin suffered in 2001.
    
    
  • Boards Tie CEO Pay More Tightly to Performance. On February 21, 2006 The Wall Street Journal reported that corporate boards are increasingly imposing performance targets on their CEO’s stock and stock options amid complaints about excessive executive pay. Last year, 30 out of 100 major U.S. corporations based a portion of the equity granted to their CEOs on company results. These findings are the result an analysis done for The Wall Street Journal by Mercer Human Resource Consulting.
    
    
  • The Cost of Corruption in Africa. The BBC reported on February 17, 2006 that Nigerian President Olusegun Obasanjo told an international conference that corruption costs Nigeria and other African countries about $148bn each year. According to the article, the figure, which he attributed to the African Union, represents 25% of Africa's official Gross National Product. The president was addressing the Extractive Industries Transparency Initiative (EITI) in Abuja and he said revenue from extractive industries - mining and oil production - was "a major contributor to this monumental and preventable loss."
    
    
  • Thousands of Kenyans Protest Government Corruption. The BBC reported on February 17, 2006 that pressures on the Kenyan government are mounting as public protests widen, following detailed corruption disclosures by former Kenyan anti-corruption minister John Githongo. On Friday, national security minister Chris Murungaru, who has resigned office now, pleaded not guilty to corruption charges and refused to declare his private assets, claiming this violated his human rights.  (Please see editorial comment on the Kenyan scandal and aid agencies on our Corruption Investigations page)
    
    
  • Newmont Agrees to $30M Pollution Deal. On February 16, 2006 the Jakarta Post reported that Newmont Mining Corp., the world's largest gold miner, agreed to pay Indonesia $30 million over a 10 year period in an effort to resolve an 18-month civil dispute with the government, which alleges that the company polluted the sea near its mine on Sulawesi island. According to the article, the money will be used to fund community development projects and scientific monitoring around site. The deal will not affect the criminal trial being held against the company for the same charges. The settlement in seen as a win for President Susilo Bambang Yudhoyono and his efforts to bring foreign investment back into the country which has suffered from a reputation as a difficult place to do business.
    
    
  • Iraq suspends Australian Wheat Deal Alleging Corruption. On February 13, 2006 The Australian reported that Iraq has suspended business transactions with Australia's monopoly wheat exporter, AWB, until a government probe of alleged corruption under the UN oil-for-food program is concluded.
    
    
  • Palestinian Corruption Probe Widens. On February 9, 2006 The Jerusalem Post reported that Palestinian prosecutors froze bank accounts and seized assets of dozens of suspects in a widening corruption probe of senior government officials, many of which members of the former ruling Fatah Party. Corruption in Fatah is seen as a key reason the Islamic militant group Hamas won parliament elections last month.    
    
    
  • Head of AWB Resigns in Iraq Kickbacks Scandal. On February 10, 2006 the Financial Times reported that the head of AWB, the Australian wheat exporter at the centre of the Iraqi bribes probe, resigned yesterday in the face of allegations that the company paid A$300m (€185m) in kickbacks to the former regime of Saddam Hussein.
    
    
  • Fresh US Outrage Ahead of China Internet Hearings. On February 10, 2006 the New York Times reported that U.S. Internet companies faced bipartisan criticism in the Congress the day prior amid rising controversy over Yahoo Inc.'s alleged role in the Chinese government's imprisonment of a second dissident. The criticism comes following a string of incidents in which Western media companies' complied with Chinese censorship policies. A Congressional hearing on the subject is scheduled for the following week.
    
    
  • Do Corruption Scandals Affect Investment? Two stories on February 8, 2006 address this question: The Financial Times reported that foreign investment in Thailand has remained stable despite the latest controversy surrounding the Prime Minister's share sales. Meanwhile, the Kenya Broadcasting Corporation reported that corruption allegations against public officials have lowered Kenya's credit rating and slowed foreign investments.
    
    
  • Child Slavery in Cocoa Production Continues to Plague Ivory Coast. On February 7, 2006 the US National Public Radio’s Marketplace reported that the International Labor Rights Fund has brought a class action lawsuit against several major chocolate producers on behalf of what they allege are over 10,000 child slaves working in the cocoa industry in the Ivory Coast. The story which can be heard on NPR’s website, is followed by a segment on Fair Trade in cocoa.
    
    

  • AIG Agrees to Record Settlements to End Alleged Accounting Fraud Investigations by U.S. Authorities. One of the world’s largest insurance companies, the American International Group (AIG), stated on February 9, 2006 that it has made payments amounting to $1.64 billion (a record) to settle all matters under investigation with the U.S. Department of Justice, the Securities & Exchange Commission and the Office of the New York Attorney General. AIG noted that as part of the settlement it has agreed to “retain for a period of three years an Independent Consultant who will conduct a review that will include the adequacy of AIG’s internal controls over financial reporting and the remediation plan that AIG has implemented as a resulted of its own internal review.”

  • Nortel Networks to Pay $2.4 Billion to Settle Suit. On February 9, 2006 the Wall Street Journal reported that Nortel Networks Corp. agreed to pay about $2.4 billion in cash and shares to settle two U.S. class-action lawsuits over the company's earnings-manipulation scandal. The Canadian telecommunications-equipment supplier said it agreed to pay $575 million in cash and issue 628.7 million shares to settle the suits. Nortel later said an independent investigation concluded that top officials manipulated the company's results to show a profit that led to the payment of bonuses to senior management. About a year ago, Nortel filed restated 2003 financial statements that slashed reported net income for that year by 41%.
    
    
  • Bad Corporate Governance To Blame for Collapse of GhanaAir. On February 8, 2006 The Ghanian Chronicle reported that, according to one expert, the collapse of Ghana Airways and the troubles that plagued Ghana National Petroleum Corporation, can all be blamed on bad corporate governance in the public sector.
    
    
  • Corporations Pay Record High in Class Action Settlements. On February 7, 2006 the Wall Street Journal reported that corporations paid a record $9.6 Billion to settle US securities class action lawsuits in 2005, compared with $2.9 billion in 2004.
    
    
  • Thai Prime Minister Shrugs Off Share Sales Protests. On February 6, 2006 The Financial Times reported that Thaksin Shinawatra, Thai prime minister, declared that he would not bow to pressure and step down from office, in the face of Bangkok protests by over 40,000 people after he sold his 49% stake in Sin Corporation for $1.8 billion. CNN reported that Shinawatra prohibited future protests from being held in front of the royal palace.
    
    
  • Major Australian Company Dragged into Oil-For-Food Scandal. The Age reported on February 4, 2006 that the Cole inquiry into the United Nations/Iraq oil-for-food scandal that has engulfed AWB will be widened to include Australia's largest resources company, BHP Billiton. Commissioner Terence Cole said he believed that the scope of the inquiry was wide enough to include proper investigation of the role of the Federal Government in the scandal. The allegation is that AWB paid $300 million in kickbacks to Saddam Hussein's regime between 1999 and 2003, disguised as trucking fees.
    
    
  • Liberian President Fires Finance Ministers. On February 2, 2006 the BBC reported that Liberia's newly installed President Ellen Johnson-Sirleaf, living up to her reputation as an "Iron Lady", has dismissed 12 Finance Ministry employees in a bid to curb the rampant corruption crippling her country.
    
    
  • Corruption rising in Iraq warns key U.S. Senator. Hearst Newspapers reported on February 3, 2006 that Republican Senator John Warner, the highly influential chairman of the Senate Armed Services Committee, said that widespread corruption and criminality are "pushing Iraq down into a morass."  He said corruption in Iraq is increasing. “The corruption, the payoffs, the graft -- all of this is just, in a sense, overlaying the courageous work of coalition forces," Warner said. He painted a grim picture of U.S. forces increasingly diverted from battling insurgents in Iraq so they could deal with corruption-linked violence.
    
    
  • Former AIG, General Re Executives Indicted. On February 2, 2006, The Wall Street Journal that three former executives and officials of the two companies were indicted with fraud charges. This relates to a larger investigation into AIG's accounts (see News).
    
    
  • Transparency International Released Its Global Corruption Report 2006 on Corruption in Healthcare on February 1, 2006. The report details how millions of lives are placed at risk each year because of corruption in healthcare that amounts to tens of billions of dollars (see Public Sector Governance International Surveys)
    
    
  • AccountAbility Report, Key Reporting Requirements for Non-Profits. Highlighting critical new trends in stakeholder reporting for non-profits, the UK authors state, "‘Non-profit organizations are often quick to demand that corporations be accountable to their stakeholders, yet frequently fail to demonstrate how they walk their own talk. Sometimes the excuse is that NGOs are too small and short on resources to report." (see NGO-Governance).|
    
    
  • Rising Business CSR Focus. The January McKinsey Quarterly highlights the rising levels of concern among corproate executvies about corporate social responsibility Executives worry about CSR, according to new McKinsey Survey (see CSR Surveys & Trends).
    
    
  • Kenya's Finance Minister Resigns Over Graft Charges. On February 1, 2006 Xinhua News Agency reported that Kenya's Finance Minister, David Mwiraria, resigned over allegations of corruption that have rocked the government, becoming the first minister in the east African nation to take such drastic decision. According to the article, Mwiraria said he was wrongly linked to a multi-million-dollar Anglo Leasing corruption scam.
    
    
  • Livedoor Scandal Prompts Calls for Japanese Account Rules. On January 31, 2006 the Financial Times reported that the president of Japan's leading accountancy body, The Japanese Institute of Certified Public Accountants, called for new rules to improve disclosure of special purpose entities, legal vehicles created to hold off-balance-sheet items, in the wake of the Livedoor scandal. The scandal involved alleged stock manipulation which led to several days of extraordinary price volatility on the Japanese Stock Market.
    
    
  • Criticism Likely as Exxon Mobil Corporation Announces Record Profits. The company is anticipating criticism from lawmakers, social activists, and consumer groups. (please see our Corporate Reputation page).
    
    
  • Enron Trial Starts in Houston: January 30, 2006 - the long-awaited trial of former Enron Chairman Kenneth Lay and former Enron CEO Jeffrey Skilling starts with jury selection in Houston today. The trial could last 3 months. 16 former Enron executives have enterede plea bargains with prosecutors and agreed to testify in this trial against their former bosses.
    
    

  • Aaron Feuerstein receives ERC Fellows' Stanley Pace Leadership in Ethics Award. Accepting the award the former U.S. executive challenged the ethics of "outsourcing and offshoring" - see a report on his remarks at our Ethical Leadership page

  • European Lobby Group Backs U.S.-Style Disclosure Rules. On January 27, 2006 the Wall Street Journal reported that a key European lobby association, the European Public Affairs Consultancies Association, is backing mandatory U.S.-style disclosure rules reform after European Union officials warned the group about the dangers of a Jack Abramoff-style scandal. The European Commission launched plans in November to impose disclosure rules on lobbyists, parliamentarians and farm-aid recipients. Until now, some top lobbyists had resisted mandatory registration, claiming the rules were unnecessary and might violate privacy laws.

  • The former Chairman Vote in Palestine Territories Seen As Rejecting Corruption. On January 27, 2006 USA Today reported that, according to voters and election analysts, the victory of Hamas, an Islamic Fundamentalist party, in the Palestinian elections is less an endorsement of terrorism than a vote for an organization that followers hope will improve government and reduce corruption. According to the article, supporters say they were fed up with the ruling Fatah Party, which many accused of corruption and general incompetence.

  • Kenya gets $25m Loan From World Bank Despite Recent Corruption Row. On January 26, 2006 The Guardian reported that the World Bank approved a $25m loan to Kenya - earmarked for fighting corruption - despite an outcry over recent allegations that senior ministers had plotted to steal millions of dollars from the treasury. According to the article, the move was blasted by anti-corruption group, Transparency International- Kenya, as antithetical to the Bank's "zero-tolerance on corruption" policy.
    
    For TI-Kenya Executive Director, Mwalimu Mati's, January 23rd statement on the Kenyan corruption scandal please follow this link.

  • Corruption Trial Opens in France. On January 24, 2006 BBC News reported that forty-nine French businessmen and public housing officials have gone on trial, accused of taking bribes when President Jacques Chirac was mayor of Paris. Mr Chirac has denied any wrongdoing and is protected by presidential immunity from standing trial.

  • Rivals Demand Early Election in Kenya Amid Corruption Scandal. The Guardian reported on January 24, 2006 that opposition leaders have urged Kenya's president, Mwai Kibaki, to dissolve his government and call an election after the publication of a dossier by former Anti-Corruption Chief John Githongo, implicating key ministers in corruption. See earlier coverage.

  • Nepalese TI Leader, Civil Rights Activist Arrested . Dr. Devendra Raj Panday, a former senior Nepal Government official and leader of Transparency International is one of many civil rights leaders to have been arrested in Nepal. News services from Nepal reported that "the royal regime arrested over 100 party leaders and cadres and members of civil society." Dr. Panday has long warned about the danger to civil society, accountability and corruption with the ending of democracy in his country (see his views on our Public Sector Governance pages).

  • Eon, RWE Investigated Over Bribery Claims. The Financial Times reported on January 24, 2006 that Eon and RWE, Germany's two largest utilities, are being investigated for bribery. According to the article, the probe, which has been going on for several months but has only just been made public, is the latest in a series of corruption allegations to have hit large German companies such as Volkswagen and Infineon

  • Major Kenyan Scandal Unfolds. The BBC reported on January 23, 2006 that Kenya's opposition coalition has urged the president to dissolve his cabinet following new allegations of corruption against four senior ministers. Over the weekend, a report by former Kenyan anti-corruption chief John Githongo was published, saying the four had tried to block corruption investigations. According to the article, two of the four, who include the vice-president and the finance minister, publicly denied the charges. (for extensive details see our Corruption Investigation page.)

  • Australian government complicity in oil-for-food corruption scandal suggested. As the high-profile investigation into alleged $300 million bribery in Iraq by the AWB (Australian Wheat Board) starts, so there are already suggestions that the Government knows a lot more about the dealings, first highlighted in the Volcker UN report, than so far disclosed, reported The AGE on January 21, 2006.

  • VW's Ferdinand Piech to Step Down in 2007, Porsche CEO to Join Board. The AP reported on January 20, 2006 that that Volkswagen AG (VW), Europe's biggest car maker, said that Ferdinand Piech, chairman of its board of directors, will step down in 2007 and that Porsche Chief Executive Wendelin Wiedeking has joined the board. The move comes after a VW corporate governance controversy which is seen as raising key ethical questions of ownership rights and influence by major shareholders, as well as the rights of minority shareholders under German business law.

  • Human Rights Watch, releasing its 2006 World Report on January 18, launched new proposals for binding international conventions to promote sound corproate social responsibility practices by business can OECD (see the EthicsWorld NGO Initiatives page).
    
    

  • Enron Executives to Argue Companies Moves Were Legal. On January 20, 2005 The Wall Street Journal reported that defense lawyers for former top Enron executives Jeffrey Skilling and Kenneth Lay will boldly argue that all of the companies actions were legal. Mr. Skilling has chosen Daniel Petrocelli, a former civil litigator to make the argument that the government is trying to criminalize legitimate accounting and financial decisions. According to the article, Mr. Skilling has spent over $40 million in constructing a legal team for his defense.

  • Writer Says She Was Paid to Write Positively of Former HealthSouth CEO. On January 20, 2006 USA Today reported that a writer who turned out a stream of sympathetic newspaper stories about former HealthSouth CEO Richard Scrushy during his fraud trial says Scrushy secretly paid her $11,000 through a public relations firm and typically read her articles before publication. Scrushy, acquitted in June of involvement in a $2.7 billion accounting fraud scheme at the chain of health clinics, strongly denied authorizing payments for any work on his behalf.

  • Business ‘Sees Gain in Binding Standards On Human Rights.’ On January 18, 2006 Human Rights Watch, in its 2006 World Report, stated that international companies have responded favorably to its campaign for binding human rights standards in the corporate sector. According to the report, this response is the result of mounting evidence, such as the market for “tainted gold” in Congo, that voluntary guidelines are unfair and ultimately hurt businesses.  To this end, the report recommended that the Organization of Economic Co-operation and Development make its corporate social responsibility guidelines binding.
    
    
  • Indian Corporate Governance Code Comes into Force. On January 18, 2005 Business Standardreported that Clause 49 of the Indian standards listing agreement, which binds stock exchanges and listed companies has come into force. The clause signals the onset of a new corporate governance code, which, among other things, regulates the composition of the board of directors. According to the code, at least half of a board has to comprise non-executive directors (this percentage changes to one third if the chairman is a non-executive director) a change which is creating upheavals in corporate boardrooms across India.  
    
    
  • Mining Company's Payments to Indonesian Military was Graft. AFP reported on January 18, 2006 that the head of Indonesia's anti-corruption commission said that US mining giant Freeport McMoran’s payments of over 20 million dollars to the Indonesian military in exchange for security services constituted graft. According to the article however, commission head Erry Riyana Hardjapamekas said that the body would not itself investigate the payments unless ordered to so by the attorney-general's office. The attorney general is expected to decide whether or not to take legal action next week.
    
    
  • New RSA Traffic IT System Helps Cut Corruption. On January 18, 2006 AllAfrica.com reported that a new information technology system launched by the Johannesburg metro police to apprehend motorists with outstanding fines has had an unexpected bonus: it is also helping to curb police corruption. According to the article, by tracking when officers stop motorists and if corresponding action is taken, the system is resulting in a more transparent and accountable police department, which has been accused of rampant corruption.
    
    
  • The US Securities and Exchange Commission Takes Landmark Top Pay Decision. The SEC announced on January 17, 2006 that it voted to publish for comment proposed rules that would amend disclosure requirements for executive and director compensation, related party transactions, director independence and other corporate governance matters, and security ownership of officers and directors. The rules, if implemented, would significantly enhance transparency in the area of top corporate compensation (see the SEC release at CSR).
    
    
  • Wall Street Bonuses to Hit Record $21.5 Billion in 2005. New York State Comptroller Alan Hevesi told Reuters on January 11, 2005 that Wall Street bonuses were at approximately $21.5 billion last year (up from $18.6 billion in 2004). This means that the average bonus in 2005 was $125,500 as investment banks reaped record earnings. Some of the most senior executives on Wall Street had total 2005 incomes of over $20 million with at least one enjoying compensation of around $47 million.
    
    

  • DaimlerChrysler Suspends 9 Managers in UN/Iraq Oil-For-Food Investigation.  DPA, the German news agency, reported on January 14, 2006 that the two leading German publications(Bild newspaper and the Der Spiegel magazine) disclosed thatDaimlerChrysler has suspended nine senior managers as a result of an investigation that they paid bribes in Iraq. The company was one of the 2,200 companies named in the Volcker Commission Report in late October that allegedly used bribes in the UN/Iraq oil-for-food program.

  • Accor of France Changes Corporate Governance.  This leading French hotel group stated on January 11, 2006 that, as a result of a vote by shareholders, it has changed its corporate governance structure to a Board of Directors from a Supervisory Board and a Management Board. In effect, this establishes a governance system much more in line with standard U.S. practice. A new Board was elected consisting of 17 members. Five are non-French nationals and a majority of them are independent directors.
    
    
  • European Parliament Suspends Top Official Suspected of Corruption. The EU Observer reported on January 10, 2006 that the EU Parliament suspended Pierre Parthoens, head of its buildings directorate unit in Brussels, according to Germany’s Stern magazine. The move comes because the Belgian top official did not inform the parliament that he is under investigation for corruption charges in his previous job. He and 12 others stand accused of bribing Belgian officials in relation to the building of a highway tunnel.
    
    
  • American International Group May Face $1 Billion Fine. An exclusive story in the Wall Street Journal on January 13, 2006, said that a settlement may soon be reached to resolve civil-fraud investigations by New York state and U.S. federal authorities into alleged improper accounting maneuvers to polish results and mislead investors and regulators by AIG, one of the world’s largest insurance companies. The report suggested the $1 billion settlement could be reached in the next three weeks and that the tentative terms would represent one of the steepest monetary penalties ever paid by a financial company.
    
    
  • Chicago bribery scandal widens. A News-wire report on January 14, 2006, stated that City Clerk James J. Laski has been charged with soliciting tens of thousands of dollars in bribes and obstructing justice. He is the most senior elected official, so far, to be charged in a widening Chicago bribery scandal that has already seen 39 people charged, with more than half of them being city public employees.
    
    

  • SEC to Propose Overhaul of Rules On Executive Pay. On January 10, 2006 The Wall Street Journal reported that the US Securities and Exchange Commission (SEC), responding to rising criticism of soaring -- and partially hidden -- executive pay, will, at a public SEC meeting on Jan. 17, propose the most sweeping overhaul of pay disclosure rules in 14 years. According to the article, the proposed changes would for the first time require corporate proxy statements to provide a column with a total annual compensation figure for each of a company's five highest-paid executives and be far more specific about the value of their various benefits, including stock options.

  • World Bank Cuts Aid to Chad – Government Reacts. Reuters reported on January 7, 2006 from Chad that the Government is shocked by the World Bank’s decision to suspend $124 million in aid. The bank acted as the government of Chad set aside a 1999 agreement by altering an oil revenue law meant to guard against corruption and safeguard funds to fight poverty. The bank has financed part of the Chad-Cameroon oil pipeline project which involves outlays of over $4 billion. It stressed from the outset that preventing corruption was a key goal of its approach. The bank said it had protracted discussions with the Chad government, but Chad's Economy Minister, Mahamat Ali Hassan, said the bank's decision “surprises us by its brutality.

  • Pemex Joins UN Global Compact. BNAmerica’s reported on January 9, 2006 that Mexico's state oil company Pemex will sign the Global Compact, which involves voluntary support for principles concerned with the environment, human rights, labor rights and anti-corruption. Pemex’s decision could have a major influence on other Mexican companies and represents a key step forward for the Global Compact, which currently claims to have 2,000 member corporations

  • Tongsun Park Arrested in Houston in Iraq Oil-For-Food Case – Bloomberg reported on January 6, 2006, that South Korean businessman Tongsun Park was arrested in Houston for his role in an alleged conspiracy related to the United Nations oil-for-food program. Mr. Park was charged by federal prosecutors in New York with working as an unregistered foreign agent on behalf of Iraq in the early and mid-1990s. The same Mr. Park was involved in the 1970s in investigations into bribery of U.S. Congressmen. Also facing charges in the oil-for-food case is Texas oilman Oscar Wyatt, who is accused of paying millions of dollars in bribes to Iraqi officials. Wyatt was arrested last year.

  • Microsoft Defends Censoring a Dissident's Blog in China.The Wall Street Journal reported on January 6, 2006 that Microsoft Corp. has shut down a popular Chinese-language blog that has published content potentially offensive to Chinese authorities, amid China's ongoing efforts to control information on the Internet. According to the article, the restrictions and censorship standards that China applies to the Internet are among the most comprehensive in the world, approached only by Iran, Myanmar, Saudi Arabia and Singapore.

  • Pemex Joins UN Global Compact. BNAmerica’s reported on January 9, 2006 that Mexico's state oil company Pemex will sign the Global Compact, which involves voluntary support for principles concerned with the environment, human rights, labor rights and anti-corruption. Pemex’s decision could have a major influence on other Mexican companies and represents a key step forward for the Global Compact, which currently claims to have 2,000 member corporations.

  • Top Republican Bows to Pressure to Give Up Leadership As Corruption Scandal Builds – The New York Times reported on January 8, 2006 that Texan Republican Congressman Tm DeLay announced that he will not seek to remain the Majority Leader of the U.S. House of Representatives. Mr. DeLay, who had temporarily stepped aside on being indicted for alleged conspiracies in Texas, has been a recipient of the largesse of Washington lobbyist Jack Abramoff, who last week pleased guilty to a variety of corruption charges and has agreed to cooperate with U.S. prosecutors in investigations into corruption by U.S. Congressmen.
    
    

  • World Bank Cuts Aid to Chad – Government Reacts. Reuters reported on January 7, 2006 from Chad that the Government is shocked by the World Bank’s decision to suspend $124 million in aid. The bank acted as the government of Chad set aside a 1999 agreement by altering an oil revenue law meant to guard against corruption and safeguard funds to fight poverty. The bank has financed part of the Chad-Cameroon oil pipeline project which involves outlays of over $4 billion. It stressed from the outset that preventing corruption was a key goal of its approach. The bank said it had protracted discussions with the Chad government, but Chad's Economy Minister, Mahamat Ali Hassan, said the bank's decision “surprises us by its brutality."

  • Tongsun Park Arrested in Houston in Iraq Oil-For-Food Case – Bloomberg reported on January 6, 2006, that South Korean businessman Tongsun Park was arrested in Houston for his role in an alleged conspiracy related to the United Nations oil-for-food program. Mr. Park was charged by federal prosecutors in New York with working as an unregistered foreign agent on behalf of Iraq in the early and mid-1990s. The same Mr. Park was involved in the 1970s in investigations into bribery of U.S. Congressmen. Also facing charges in the oil-for-food case is Texas oilman Oscar Wyatt, who is accused of paying millions of dollars in bribes to Iraqi officials. Wyatt was arrested last year.

  • Microsoft Defends Censoring a Dissident's Blog in China. The Wall Street Journal reported on January 6, 2006 that Microsoft Corp. has shut down a popular Chinese-language blog that has published content potentially offensive to Chinese authorities, amid China's ongoing efforts to control information on the Internet. According to the article, the restrictions and censorship standards that China applies to the Internet are among the most comprehensive in the world, approached only by Iran, Myanmar, Saudi Arabia and Singapore.

  • SEC Stakes Out Middle Ground On Fines Policy. The Wall Street Journal reported on January 5, 2006 that the Securities and Exchange Commission, seeking to defuse a controversy about its use of big fines to punish corporate wrongdoing, publicly laid out a set of guidelines to help determine whether and how much to fine companies engaged in financial fraud. The strategy proposes greater penalties for companies that benefit directly from widespread fraud.

  • The Global Reporting Initiative (GRI) Releases New Guidelines for Comment.  January 4, 2006 – the GRI is now seeking comments on its “G3 Guidelines” that will play a critical role in influencing the ways in which companies publicly report their corporate social responsibility performance. The very detailed statement on the guidelines that GRI has now published can serve a key standard-setter for business. Comments are sought by March 31, 2006. GRI notes that, “The Guidelines consist of principles for defining report content and ensuring the quality of reported information as well as standard disclosures comprising performance indicators and other disclosure items. The Guidelines also include guidance on specific technical issues in reporting.“
  
  
  • Peru Asks Chile to Extradite Fujimori. On January 4, 2006 the Washington Post reported that Peru's government formally asked Chile to extradite former president Alberto Fujimori and handed over 12 boxes of evidence that it said links him to human rights violations and corruption. Fujimori was arrested on Nov. 7 in Chile, after defying an international warrant and returning to South America from Japan, which had granted him asylum when he fled Peru in 2000 during a corruption scandal.

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