News Archive: September - December 2005

• Mugabe Clamps Down on Zimbabwe Central Bank Corruption Investigations. Zim Online reported on December 30, 2005 that President Robert Mugabe has ordered Reserve Bank of Zimbabwe (RBZ) officials to seek approval from his office first before investigating senior government and ruling Zanu PF party officials accused of corruption. The directive also requires the central bank, which has spearheaded a crackdown on corruption against Mugabe's ministers, to consult with the government's intelligence ministry before embarking on any other "sensitive" investigations, according to a memo sent to the RBZ.
  
  
• Executive Pay to Be New Year's Hot Topic. The Financial Times reported on December 29, 2005 that Alyssa Ellsworth, managing director of the Council of Institutional Investors, whose members are pension funds worth more than $3,000bn, said executive compensation would be the "headline issue" at the companies annual meetings this spring and throughout 2006. According to the article, new evidence suggesting that executive pay growth is accelerating, coupled with outrage at big severance packages for some bosses, has pushed the issue to the top of investors' concerns.
  
  

• Singapore leads in corporate governance. Singapore remains the top ranking country among 10 Asian economies in the area of corporate governance standards, according to a report by Asian Corporate Governance Association (ACGA) and CLSA Asia-Pacific Markets.  Accounting Education reported on December 27, 2005, that the report, CG Watch 2005: The Holy Grail, assessed the quality of corporate governance in 10 Asian markets with data from 496 listed companies. Hong Kong was one percentage point behind Singapore at 69%/; India and Malaysia retained third and fourth place, respectively, at 61% and 56%; next was Taiwan at 52%; Korea slipped below Taiwan and shared the next place with Thailand with both at 50%;  then Philippines 46%, China 44% and Indonesia 37%.

• Australian police corruption. The Sunday Mail, Australia, reported on December 26, 2005 that, ”Victoria’s top cop has denied that her force is riddled with corruption. Chief Commissioner Christine Nixon said corruption was being weeded out. “I've seen pockets of corruption that we are working on, but to say it's systemic says it's from the top to the bottom and I would absolutely deny that's the case in Victoria Police," Ms Nixon said.
  
  
• Nigerian Senate President blames corruption on poverty. Senate President, Chief Ken Nnamani, said corruption and massive transfer of Nigeria’s resources abroad are largely responsible for Nigeria’s level of poverty and underdevelopment. The Sunday Independent reported on December 26, 2005, that he stressed that “the ongoing war against corruption must be given adequate support by all for the enthronement of good governance through transparency accountability and probity, adding “anything short of this will sink the country deeper into poverty”.
  
  
• Corruption cost China 36-billion dollars in 2005.  ABC/AsiaPacific reported on December 26, 2005 that investigators in China uncovered the illegal use of over 36-billion dollars in government funds in 2005. These are some of the findings of the National Audit Office, which is also investigating possible corruption at major banks.
  
  
• Poland’s new president vows to wage war on corruption. In his inauguration address Lech Kaczynski on December 24, 2005 stressed his trademark themes of ridding the country of corruption and the influence of former apparatchiks. The Scotsman news service reported that this was the central theme of his speech. A month ago, the Law and Justice party, led by his twin brother Jaroslaw, won parliamentary elections and installed conservative Kazimierz Marcin-kiewicz as prime minister.
  
  
• Police Raid Thales in Corruption Probe. The AP reported on December 22, 2005 that French judges searched the headquarters of Thales SA as part of a probe into charges of corruption at the French defense electronics firm. It has been accused by a former employee of paying out millions of dollars in bribes, according to judicial officials.
  
  
• Bill to Increase Russia's Control Over Civil Society Moves Ahead. The New York Times reported on December 21, 2005 that Russia's lower house of Parliament amended legislation intended to increase the government's control over charities and other private organizations, but left in place core provisions that critics said would open the groups to political pressure or even force them to close. According to the article, critics complained that President Putin's government is determined to exert power over one of the last parts of society not already dominated by the state and that the driving motive beyond the law is “to weaken what has been seen there as foreign, especially American, support for democratic movements in Ukraine and other former Soviet states or satellites.”
  
  

• Regulators Target Fake Tamiflu Sellers. The Financial Times reported on December 21, 2005 that international regulators have launched a series of “sting” operations against illegal producers and sellers of the bird-flu drug Tamiflu. The move comes amid growing concerns about a shortage of supply of the drug manufactured by Roche of Switzerland. The debate highlights the dilemma faced by companies like Roche of ensuring adequate supplies of drugs while guarding against patent infringements.

• Germany's Ackermann Faces Retrial in Mannesmann Governance Case. The Wall Street Journal reported on December 21, 2005, that Germany’s Federal Court of Justice has upheld an appeal from public prosecutors who challenged the acquittal last year of key former Mannesmann AG supervisory board directors who gave multi-million dollar bonuses to top company executives after a successful merger deal with Vodafone of the UK.  This most likely means another trial for those who were acquitted, including Deutsche Bank’s chairman and CEO Josef Ackermann. The judges said there was a suspicion that Mannesmann had suffered a breach of trust.
  
  
• Ex-Chief of Qwest is Indicted for Insider Trading. The New York Times reported on December 21, 2005 that Joseph P. Nacchio, the former chief of Qwest Communications International, had been indicted on charges of insider trading involving stock sales worth more than $100 million. According to the indictment, Mr. Nacchio knew that Qwest was in danger of missing its financial targets at the time that he sold over 2.5 million shares in the first half of 2001.
  
  
• Bribery Allegations at the Top US Rater of Diamonds Are Rocking Jewelry Industry. The Wall Street Journal reported on December 20, 2005 that the Gemological Institute of America, which grades diamonds for independent dealers and big retailers such as Tiffany & Co. and Bailey Banks & Biddle, recently fired four employees for ethics code violations and shuffled top management after a four-month internal probe of its policies. The Institute is currently in talks to settle a lawsuit filed last spring by a diamond dealer accusing workers in its New York laboratory of taking bribes to inflate the quality of diamonds in grading reports.
  
  
• $80 Million Levied For Foreign Dealings, Money Laundering. The Washington Post reported on December 20, 2005 that federal and state financial regulators announced that they are levying $80 million in fines against ABN Amro Bank NV, a Dutch lender, for failing to comply with money-laundering monitoring requirements, particularly with regard to money transfers involving Iran and Libya. The fines rank among the largest penalties ever imposed on a bank, according to Molly Millerwise, a spokeswoman for the U.S. Treasury, although some of the other major fines have involved different types of violations.
  
• Bank of Italy Governor Antonio Fazio Resigns. Reuters reported December 19, 2005 that the Governor resigned finally succumbing to months of intense pressure after he was directly implicated in a bank takeover scandal. A series of stories last week tracked the mounting scandal (News).
  
  
• Nepal Tax Laws Not Supportive for Checking Corruption. On December 19, 2005 NewsLine Nepal reported that two key Nepalese tax laws, Income Tax Act 2058 and Value Added Tax Act 2052, were said to promote corruption. At a Federation of Nepalese Chambers of Commerce and Industry conference experts suggested that the laws contain vague and ambiguous clauses, providing tax officers with selective powers and upholding lengthy procedures vulnerable to bribery.
  
  
• China Corruption Execution: Prensa Latina reported on December 17, 2005 from Beijing that Lu Wanli, former director of the Communications and Transportation department of the central Chinese province of Guizou, was executed for corruption charges. The Supreme People´s Court ratified the death penalty and Lu was executed on Friday. According to judicial sources, the former high-ranking official accepted 3.16 million dollars in bribes when he served as province director of Transportation and general manager of the Railroad Development Company from June 1998 to January 2002.
  
  
• "Sarbanes-Oxley Compliance Hits 15 Percent of the 2006 IT Budget." Gartner, Inc. released preliminary results of a survey of 326 audit, finance and IT professionals and concluded that compliance initiatives related to the Sarbanes-Oxley Act (SOX), are diverting a large amount of new IT project discretionary resources to support corporate governance efforts. IT financial compliance management spending may increase to 10%-15% of corporate IT budgets in 2006, up from less than 5% percent in 2004.
  
  

• Another arrest in U.S. Iraq bribery investigation. The New York Times reported December 16, 2005 that Lt. Col. Debra Harrison has been arrested in an expanding investigation into bribes to U.S. army officers by contractors to win construction contracts in Iraq. This is the fourth arrest and more arrests are probable, according to the office of the Special Inspector General for Iraq Reconstruction. Colonel Harrison allegedly received from contractors cash bribes of $80,000 to $100,000, a Cadillac Escalade, a trove of illegal weaponry and other items.

• Capitol Hill Corruption. Lobbyist Jack Abramoff, who is at the center of what is widely seen in Washington as potentially the largest Capitol Hill corruption scandal suffered another blow yesterday. The Washington Post reported on December 16, 2005 that one of his former partners,  Adam Kidan agreed to cooperate with Government investigators as he pleaded guilty in Miami to fraud and conspiracy charges.

• Report Says Ex-A.I.G. Chief Defrauded Foundation 35 Years Ago. The New York Times reported on December 15, 2005 that Elitot Spitzer, the New York attorney-general, submitted a report as part of his lawsuit against Maurice G. Greenberg, the former chief executive of American International Group, contending that Mr. Greenberg unfarily enriched himself and other A.I.G. executives in a series of transactions that violated the will of Cornelius Vander Star, the companie's founder, and defrauded the foundation he created. The questionable actions took place more than 35 years ago. The Starr Foundation, headed by Mr. Greenberg is one of the largest charitable organizations in the nation with $3.5 billion in assets.
  
  
• Enron Trial Starts next month. Former Enron Chairman and CEO Ken Lay said at The Houston Forum that he plans to testify at his trial. The New York Times reported on December 14, 2005, that Mr. Lay told his audience” We must create our own wave of truth. I believe the return to sanity has begun.” He attributed Enron’s collapse to former chief financial officer Andrew Fastow.
  
  
• Korea: Corruption Probe of Top Industrialists Ends. Chosun reported December 14, 2005 that prosecutors have dropped corruption charges against some of the country’s most prominent figures arising from a marathon probe into the clandestine eavesdropping activities of the secret services. The investigations date back to 1997. Seoul Central District Prosecutors Office dropped charges, citing lack of sufficient evidence, against Samsung chairman Lee Kun-hee, Samsung vice-chairman Lee Hak-soo and former ambassador to the U.S. and ex-JoongAng Ilbo publisher Hong Seok-hyun for illegally funding presidential candidates and bribing prosecutors.
  
  

• Mexico Lawmakers Pass Stock Market Law to Strengthen Corporate Governance. El Universal reported on December, 14, 2005 that the Mexican Senate unanimously passed a new stock market law that will boost the number of companies that trade on market. This follows the bill's passages by Mexico's lower house of Congress (AP December 6, 2005). The law expands the definition of data that listed companies must report to the stock market to include anything that could affect their share price. The new law should make it easier for medium-size companies to list on the local stock market since it allows them to tap into money from institutional investors in exchange for adopting higher corporate governance standards that offer greater protection to minority holders.

• The head of Indonesia's national election commission has been sentenced to seven years in jail for corruption. The BBC reported December 14, 2005 that prosecutors had said Nazaruddin Sjamsuddin received kickbacks from an insurance firm that won a contract related to the 2004 presidential poll.
  
  
• Pfizer Plans Study of Celebrex Drug for Heart Risks.  Bloomberg reported on December 13, 2005 that Pfizer Inc. will pay for a worldwide study of 20,000 patients to determine the potential heart risk of its Celebrex painkiller, a similar drug to Merck & Co.'s Vioxx, which was withdrawn last year. The study begins next year and will evaluate Celebrex relative to other key drugs. The major study will be called  “PRECISION Trial – Prospective Randomized Evaluation of Celecoxib Integrated Safety vs. Ibuprofen or Naproxen,” according to the Cleveland Clinic
  
  

• Italian ethics - what ethics? Italian authorities detained Gianpiero Fiorani, the former head of Banca Popolare Italiana, according to the Financial Times, December 14, 2005. He is being investigated over his relationship to the Central Bank.  Dow Jones reported December 12, 2005 that Bank of Italy Governor Antonio Fazio and members of his family received Dom Perignon Champagne, a Cartier watch, a Prada handbag, rare religious texts and thousands of dollars in other gifts in a five-year period from an Italian banker who later won Mr. Fazio's support for a controversial merger bid, according to documents connected with an investigation by Italian magistrates. Mr. Fazio is undser investigation for insider trading and moves are afoot in the Italian Parliament to promote a law to oust the Governor, according to AP on December 16, 2005.

• Judge Declares Mistrial In Federal Vioxx Case. Bloomberg reported December 12, 2005, that a jury in the Houston trial was unable to agree on a verdict. Vioxx was manufactured by Merck, which is embroiled in controversy and a flood of litigation. On December 9, 2005, the Boston Globe reported that an editorial in The New England Journal of Medicine (NEJM) alleged that Merck excluded critical evidence of the negative cardiovascular effects of the painkiller, Vioxx, in a key study on the drug. Merck submitted the study which the NEJM then published in 2000.

• World Bank Fears Changes in Chad-Cameroon Oil Pipeline Laws. The Financial Times, December 9, 2005 reported that the World Bank expressed “serious concerns” over the Chad governments plans to re-write laws restrictingthe use of pipeline revenue to poverty- reduction programs. The $3.7 billion Chad-Cameroon pipeline is seen by many as a test of the Bank's capacity to support energy projects in countries with high levels of corruption by requiring administrative oversight of revenues and designating how they should be used

• Porsche statement, VW corporate governance.  The Financial Times, December 8, 2005, reported  that Porsche CEO Wendelin Wiedeking defended the company’s call for a seat on the Volkwagen Supervisory Board (Porsche recently bought a 19% share in VW) and called attacks on VW’s corporate governance, “nonsense.”  Earlier, Reuters reported that VW Supervisory Board Chairman Ferdinand Piech, who is also a major shareholder in Porsche, defended VW’s corporate governance and his actions in the company, which have been attacked by minority shareholders charging conflicts of interest. The controversy 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.

• Dishonesty a hurdle to good corporate governance. SABCNews in South Africa reported on December 5, 2005, that Business Unity South Africa (Busa) said the lack of ethics and integrity in the corporate sector is deterring good corporate governance in South Africa. It noted a KPMG survey showing that 76% of companies have experienced fraud committed by employees and 32% by management. Jacques Marnewicke of Busa said: "We are looking at some form of register where we can list ethical offenders, how it will work and what impact the Constitution will have on a list like that.”
  
  
• Jose Dirceu, former chief of staff of President Lula is the latest to fall in the nation's corruption scandal. BBC reported December 2, 2005 that he was expelled from Congress after being impeached by a vote of 293-192. He has been accused of masterminding a scheme under which the governing Workers Party allegedly paid bribes to its congressional allies for votes.
  
  
• Ex-Hollinger Chief, released on $20 million bail, enters Chicago court to plead. Bloomberg reported December 1, 2005, Conrad Black, the former Hollinger International Inc. chairman accused of helping steal $51.8 million from the company, arrived at Chicago's federal courthouse to be fingerprinted and photographed today before entering a plea on wire and mail fraud charges.
  
  
• German money-laundering trail leads to Kremlin. In an exclusive story in the December 2, 2005 Wall Street Journal, reporters David Crawford, Glenn R. Simpson and Gregory L. White wrote that a money-laundering scandal that started in Germany has spread to other countries and now implicates a top Russian official who is a close ally of President Vladimir Putin, say law-enforcement officials with knowledge of the situation. They add that a scheme has been uncovered that involved setting up a network of shell companies and trusts to secure and hide more than $1 billion in assets. WSJ European columnist Frederick Kempe noted: "The corruption allegations are perhaps the most serious ever to reach the Kremlin, delivered against a Russian leader whose ministry controls most Russian phone companies and regulates the rest. Frankfurt prosecutors have named Russia's telecom minister, Leonid Reiman, as a central figure in a German criminal probe that has already prompted the resignation of a Commerzbank board member and has spawned parallel inquiries in the U.S, Cyprus and Switzerland. The prosecutors lay out what they suspect was an elaborate scheme by Mr. Reiman to milk Russian state-owned telecom companies for cash or divert their assets.
  
  
• U.S. Army Officer Charged in Iraq Investigation. Yet another charge has been filed in US District Court involving US reconstruction funds in Iraq.  The New York Times reported December 2, 2005, that U.S. Army officer, Lt. Col. Michael Brian Wheeler, who helped supervise millions of dollars in reconstruction projects, has been charged with smuggling hundreds of thousands of dollars in stolen cash from Iraq and using some of it to buy machine guns, grenade launchers and other illegal arms that were later found in a garage in North Carolina. He is the third person to be arrested in a widening investigation by a special inspector general for Iraq reconstruction. 
  
  
• Whitewash feared in oil-for-food scandal. The Financial Times reported on December 2, 2005, that one month after Paul Volcker published his report on corruption in the United Nations-monitored Iraq oil-for-food programme, anti-corruption campaigners fear the world’s governments will sweep its findings under the carpet. Some 2,253 companies were accused of taking kickbacks from Saddam Hussein’s regime. The investigation lasted 18 months and cost $35m. But the UN has no power to prosecute, and the bulk of action now lies with national authorities. An informal survey by Financial Times reporters has shown that individual countries’ readiness to take further action is decidedly mixed, even in nations that might otherwise claim to be on the virtuous end of the fight against corruption.
  
  
• Corruption charges dismissed against Benazir Bhutto. AFP reported November 30, 2005, that the former Prime Minister of Pakistan has won a major victory. "The prosecution has failed to prove its case against any of the accused. I, therefore, acquit all the accused," Judge Parkash Lal Ambwani of the National Accountability Bureau (NAB) said in his judgement relating to Mrs. Bhutto and four co-defendants in case where allegedly they corruptly secured some 800 appointments to the national flag carrier, Pakistan International Airlines (PIA), while she held power.
  
  
• Corporate Governance Singapore. Channel News Asia reported November 29, 2005, that the Monetary Authority of Singapore has issued a set of new corporate governance regulations for the Singapore Exchange. SGX has until its annual general meeting in 2007 to comply with the new rules. The new regulations will require SGX to adopt more stringent corporate governance standards than currently recommended for Singapore-listed companies under the Code of Corporate Governance. Among the changes, independent directors of SGX will not be allowed to serve as board members of other companies listed on the bourse. SGX will also have to set up a Conflicts Committee to oversee its conflicting roles as a listed company and a stock regulator.
  
  
• US Congressman Admits taking Bribes from Defense Contractor. Republican Randy Cunningham, 63, resigned from the US Congress today on pleading guilty in Californian court on charges of taking $2.4 million from a military contractor, The New York Times reported on November 28, 2005. The eight-term Congressman was one of the most highly decorated Vietnam War fighter pilots.
  
  
• Roche Says Three Asian Nations Are Free to Manufacture Tamiflu. Amid global debate over the availability of a bird flu vaccine, Roche Holding AG, maker of the flu treatment Tamiflu, said it has told the governments of Thailand, the Philippines and Indonesia that they are free to manufacture the medication without paying compensation to Roche because the drug isn't patent-protected in the three countries, reported the Wall Street Journal on November 26, 2005.
  
  
• An Architect Cuts Corners, and Shakes Japan's Faith. The New York Times reported November 26, 2005 from Tokyo that Hidetsugu Aneha, architect of 21 prominent buildings, circumvented earthquake security regulations. The report said the “case of the architect caught cheating on earthquake building codes has transfixed Japan. Night after night, television news programs feature video clips of tearful condominium owners moving out of their new apartments, while construction company owners, inspectors and the architect involved in the deficient buildings blame one another for the failings. ” So far, seven hotels have been forced to close, including a 260-room tower that opened in August near the Tokyo Stock Exchange. The story implies that private inspection companies won contracts from contractors in part by being willing to overlook key building code requirements.
  
  
• Pinochet arrested.  AP reported November 23, 2005 that former Chilean President Augusto Pinochet, just two days before his 90th birthday, was placed under house arrest at his Santiago mansion. Pinochet was charged with evading $2.4 million in taxes, using four false passports to open bank accounts abroad, submitting a false government document to a foreign bank and filing a false report on his assets. His attorneys appealed the ruling on grounds of his ill health, as they have done previously on other charges.
  
  
• South Africa: The time is ripe for a principled, ANC-led offensive against corruption. The Daily News reported November 22, 2005 that this call has been made by Jeremy Cronin, a member of the ANC national executive and SACP deputy secretary-general. He stressed in a paper analysing post-apartheid South Africa that the Zuma crisis, the constant round of corruption scandals, and growing township disaffection with perceived or actual corruption in local government, had created an opportunity in which such an offensive to review current approaches and policies has become "possible and desperately necessary".
  
  
• Parmalat money laundering in Brazil. The Wall Street Journal published an AP story November 22, 2005 stating that Brazilian police said two former top executives of Parmalat SpA's Brazilian division illegally transferred more than $800 million of the Italian dairy giant's money in and out of Brazil before it collapsed two years ago in a massive fraud scandal. Former Parmalat Brasil Chief Executive Gianni Grisendi and the division's former financial director, Carlos de Souza Monteiro, oversaw the transfers in an alleged effort to avoid corporate taxes and could be charged with money laundering, police said.
  
  
• APEC - Business Anti-Corruption Declaration.  The Korea Times reported November 19, 2005 from Pusan that business leaders from the 21 economies in the Asia- Pacific region adopted an anti-corruption declaration, urging their heads of state to make greater efforts to eliminate corruption and enhance transparency. APEC Business Advisory Council (ABAC) 2005 chair Hyun Jae-hyun delivered the declaration to South Korean President Roh Moo-hyun on the second-day of the APEC CEO Summit. The statement contains signatures of 393 entrepreneurs in support of APEC’s anti-corruption campaign.
  
  
• Top US Congress official charged as biggest lobbying-Congress scandal deepens. Reuters reported November 18, 2005 that former top aide to former House Republican Leader Tom DeLay of Texas has been charged with conspiring with his lobbyist partner Jack Abramoff to defraud Indian tribes of millions of dollars and to corruptly give gifts to a member of Congress, prosecutors said. Scanlon appears to have accepted a plea agreement on a charge that suggests he was instrumental in major gifts and kick-backs to a member of Congress, identified only as "Representative No. 1."
  
  
• West Australian Government launches inquiry into the State's corruption legislation amid concerns it is unable to achieve its purpose of tackling organised crime. The Sunday Times, November 18, 2005, reported that Chairman of the Joint Standing Committee on the Crime and Corruption Commission John Hyde,  said the corruption watchdog believed the legislation was unable to achieve the purpose for which it was drafted. Supreme Court dismissal of proceedings base on the Commission’s work have raised questions now about the power of the Commission.
  
  
• Halliburton allegations over Iraq work sent to Justice Department. Bloomberg news reported November 18, 2005 that the Justice Department is pursuing a criminal investigation into “allegations about wrongdoing'' in connection with Halliburton's Kellogg, Brown and Root unit’s work in Iraq. The allegations of contract abuses arose from June 27 testimony by Bunnatine Greenhouse, principal assistant responsible for contracting for the U.S. Army Corps of Engineers, before the Senate Democratic Policy Committee. Separately, Pentagon auditors have questioned more than $1 billion of work by the company in Iraq.
  
  
• The first of possibly many arrests of Americans engaged in corruption in Iraq was announced on November 18, 2005. The Los Angeles Times reported that Robert Stein, a former U.S. contract supervisor in Iraq faces criminal charges related to the multibillion-dollar reconstruction of the country.  He was arrested in connection with an allegedly fraudulent scheme to award construction contracts worth more than $18 million. Philip H. Bloom, a New Jersey businessman, allegedly paid Stein at least $630,000 in kickbacks for his part in a bid-rigging scheme in 2003 and 2004. Jim Mitchell, a spokesman for the U.S. Inspector General's office, said these were only the first charges, and "there will be more." He said investigators were looking at about 50 potential criminal cases across Iraq.
  
  
• White House Ethics Classes. As the US Vice President's Chief of Staff, Scooter Libby, was indicted on perjury charges, President Bush announced that all 3,000 of the senior White House staff would take ethics training courses. AP Special US Prosecutor Fitzgerald announced November 18, 2005, that he is extending his investigations of the White House.
  
  
• Fujimori's Return Rouses Fans and Foes. A feature article in The Washington Post, November 19, 2005, by reporter Monte Reel in Lima, Peru, highlights the machinations of a character who has come to be seen as a key figure in what could well be the largest corruption scandal ever to grip Latin America. The article carries the headline: Former Peruvian President Held in Chile, but Even Critics Do Not Discount Comeback. Reel writes that, “ His campaign office is hidden behind an unmarked door on a nondescript street. There are no banners, bunting or posters of the candidate, who at the moment is in custody in Chile. But the inconspicuous setting perfectly suits Alberto Fujimori's stealthy pursuit of Peru's presidency.”
  
  

• Black Charged. Reuters reported on November 17, 2005 that U.S. prosecutors announced criminal fraud charges against Conrad Black and his former associates, accusing the ex-publisher of looting his now-shrunken media empire, once one of the world's largest. Prosecutors said they would seek the forfeiture of at least $80 million from Black and other former associates of his. Hollinger International, Black’s former company, has sued him and others for $542 million.
  
  

• Indonesia drops Newmont civil case. The Rocky Mountain News reported November 16, 2005, that the Indonesian Government has dropped its $134 million civil case against Newmont Mining, the world’s largest gold mining company. The case fell apart after a district court dismissed the charges accusing the gold producer of pollution, saying the case should be taken to international arbitration. But the Government is still pursuing the more serious, landmark, criminal prosecution of Newmont over environmental allegations.

• Israeli Prime Minister Ariel Sharon's eldest son pleaded guilty November 15, 2005, to illegal fund-raising charges stemming from his father's 1999 election campaign, his attorney said. AP reported Omri Sharon and his brother, Gilad, helped their father sweep a 1999 primary in the Likud Party, overseeing parts of the campaign and fund-raising. Omri Sharon, a member of parliament, admitted to all the charges, which carry a maximum of five years in prison.
  
  
• 40 Serbian Judges Charged With Corruption. Radio Free Europe reported on November 13, 2005, that authorities in Serbia have brought criminal charges against 40 judges in an effort to fight corruption. Justice Minister Zoran Stojkovic said Serbia's judiciary was plagued with corruption, and that the 40 judges came from across the Balkan country and included the heads of some courts. Serbia has launched talks on establishing closer ties with the European Union in hopes of eventually joining the bloc. EU officials have urged Serbia's authorities to root out corruption.
  
  
• India's Prime Minister Launches investigation after UN-Volcker report. Indian Express reported November 8, 2005, that PM Manmohan Singh announced a judicial "search" for truth, but maintained that there was no evidence of wrongdoing despite the Volcker findings. Meanwhile, External Affairs Minister K. Natwar Singh was forced to resign his key post, but he remains in the Cabinet without portfolio. The Foreign Minister was named in the Volcker report on the UN-Iraq oil-for-food scandal.
  
  

• Corporate bankruptcy raises ethical leadership issues again. Six major U.S. trade unions said on November 7, 2005 that they are backing workers who are facing wage and benefit cuts at Delphi Corporation - one of the largest US auto parts manufacturers. In a statement the unions said "“We are outraged by Delphi’s attempt to use the bankruptcy process to dictate the radical destruction of the living standards of America’s industrial workers, while at the same time it plans to reward some 500 ‘key employees’ with up to 10 percent of the company’s stock and cash bonuses totaling $87.9 million."

• World Bank pulls Bangladesh cash. The BBC reported November 7, 2005 that the World Bank says it has cancelled $1m in funding for three development projects in Bangladesh after it found evidence of corrupt bidding practices. A government spokesman said the allegations would be investigated.

• Merck Scores Major Victory In the Second Vioxx Trial. The Wall Street Journal reported on November 3, 2005 that Merck & Co. emerged unscathed from the second high-stakes trial over its Vioxx painkiller, marking a critical comeback from a big loss in the first trial and giving the drug giant momentum as it faces a wave of lawsuits related to its former blockbuster. A jury concluded that Merck fairly represented the safety risks of its Vioxx painkiller, and that Merck didn't commit consumer fraud, meaning that it fairly marketed the drug to doctors and patients.

• Norway. Proposal Invites Corruption. Aftenposten in Oslo reports that Transparency International Norway believes that government plans to raise the price limit before bidding is required on public purchasing will lead to more corruption. The new left-center alliance's government platform, the Soria Moria Declaration, said that the threshold value for competitive bidding for public purchases would be raised to European Union levels.Norway's current limit for requiring competitive bidding is NOK 500,000 (USD 77,500), the EU limit is NOK 1.8 million.
  
  
• Further costs to KPMG over tax shelters. November 1, 2005. A U.S. federal judge granted preliminary approval to a proposed $225 million class-action settlement by the accounting firm KPMG LLP and the Sidley Austin Brown & Wood LLP law firm over questionable tax shelters that KPMG sold to hundreds of wealthy individuals. The Wall Street Journal noted that the ruling comes two months after KPMG reached a $456 million settlement with the Justice Department over the same four kinds of tax shelters, under which KPMG avoided federal prosecution but admitted criminal wrongdoing. (See more news stories on auditors.)
  
  

• White House Indictment. The Office of Special Counsel Patrick J. Fitzgerald on October 28, 2005, filed five criminal charges against I. Lewis Libby, the chief of staff of the Vice President of the United States and Senior White House Counsel. The release from the Special Counsel is headed: “White House Official I. Lewis Libby indicated on obstruction of justice, false statement and perjury charges relating to leak of classified information revealing CIA officer’s identity.”

• Boards fail to get the best out of directors. A survey released October 28, 2005 by the Geneva-based INSEAD business school found that European boards of directors are taking too long to exploit the full potential of new non-executives, making it hard for them to act effectively. The Financial Times reported that the survey covered 163 independent appointees to the boards of Europe's top 500 companies. It draws attention to weaknesses in the boardroom just when boards are being encouraged to take on more independent, non-executive board directors with the skills to challenge management.

• Berlusconi TV fraud hearing starts in Italy. October 28, 2005. AP reported that an Italian court began closed-door hearings to decide whether to indict Prime Minister Silvio Berlusconi and 13 others for alleged fraud at his family's broadcaster Mediaset. If charged, Berlusconi could find himself on trial during what is likely to be a close-fought general election next April. The proceedings follow a four-year investigation by Milan prosecutors into claims of embezzlement, false accounting, tax fraud and money laundering in a disputed television rights deal.

• Lula’s Aide Guilty of Ethics Breach. October 28, 2005. A congressional panel voted overwhelmingly to submit former Brazilian presidential aide Jose Dirceu to impeachment proceedings next month in the lower house of Congress over his alleged involvement in a corruption scandal, according to Reuters. Dirceu, who resigned from his chief of staff post in June amid charges that he orchestrated illegal campaign funding and bribed legislators for their support in Congress, could be barred from holding public office for up to eight years.

• Over 2000 companies allegedly paid bribes to Iraq in UN scandal. The final report, October 27, 2005, by the Volcker Commission on the UN oil-for-food scandal in Iraq alleges (based mainly on documents obtained from Iraq, which may be questionable themselves) that over 2,000 companies appear to have paid bribes to officials in the Hussein government, including major global enterprises such as Daimler-Chrysler, Siemens and Volvo (fuller story at Views).The inquiry was led by Paul A. Volcker, former chairman of the Federal Reserve Board.

• Guy Drut faces being expelled from the International Olympic Committee. The Guardian, October 27, 2005, reports that the former French sports minister received a 15-month suspended sentence in Paris yesterday and a €50,000 fine for corruption charges. "The case has been with the ethics commission which will [study] the matter further and . . . [make] a recommendation to the IOC," said Giselle Davies, an IOC spokeswoman, last night.
  
  
• Scrushy, Ex-Alabama Governor Indicted in Bribery Case. October 27, 2005, Bloomberg reported that U.S. prosecutors, who failed to convict former HealthSouth Corp. CEO Richard Scrushy of masterminding a $2.7 billion accounting fraud, have now charged him with bribing a former Alabama governor. Scrushy was accused of paying $500,000 to former Governor Don Siegelman in exchange for an appointment to a state hospital regulatory board. Siegelman, governor from 1999 to 2003, was indicted along with another former state official for engaging in a "widespread racketeering conspiracy.''
  
  

• DaimlerChrysler takes charge on bribery allegations. The company charged €125 million for tax liabilities related to an internal investigation into allegations that it paid bribes in foreign countries, reports The Wall Street Journal, October 26, 2005. The SEC and U.S. Justice Department are investigating after a wrongful-dismissal lawsuit filed by a former employee who claimed Daimler kept secret bank accounts. The automaker has said it is voluntarily sharing information with officials.

• Wal-Mart Stores Inc. announces major new social responsibility policies. October 25, 2005, CEO Lee Scott said the world's biggest retailer would move to take the lead in efforts to switch to renewable energy sources, raise employees’ wages, increase community involvement and be proactive about employees’ recurrent health issues such as obesity-related illnesses. Media reactions (for example, The New York Times, Financial Times, etc.) viewed the statement as representing a fundamental shift in the company’s approaches.

• Corruption is Russia’s “biggest problem”, October 22, 2005 article, “Blood Money”, in The Economist cites pervasive corruption involving the military, licensing and terrorist attacks. It adds that “in Russia corruption is everywhere…it seems not a by-product of policy and events, but the main reason for them."

• China to ratify UN convention against corruption. The China Daily reported on October 22, 2005, that legislation has been sent to the National People's Congress and (NPC) Standing Committee and Premier Wen Jiabao said the convention "is conducive to the repatriation of corrupt criminals fled abroad and the recovery of Chinese assets illegally transferred to foreign lands."

• Bird Flu Vaccine Production to Become Widespead - Roche Holding AG issued a statement, October 18, 2005, about its willingness to allow others to manufacture Tamiflu, the bird flu vaccine. William M. Burns, CEO Roche Pharma Division, commented, "For Tamiflu, the key need today is the rapid expansion of production capacity. Patients' needs in case of a pandemic remain our top priority… we are prepared to discuss all available options, including granting sub-licenses, with any government or private company who approaches us to manufacture Tamiflu or collaborate with us in its manufacturing. In support of the global effort to fight a potential pandemic, we would be prepared to discuss such sub-licenses to increase the manufacturing of Tamiflu, provided such groups can realistically produce substantial amounts of the medicine for emergency pandemic use, in accordance with appropriate quality specifications, safety and regulatory guidelines."

• 10 more indicted in KPMG tax case – Associated Press reported on October 18, 2005 from New York -  A federal grand jury indicted 10 more people associated with accounting firm KPMG yesterday in a case alleging that bogus tax shelters the company sold helped rich clients avoid billions of dollars in taxes. KPMG's former chief financial officer, Richard Rosenthal, was among the latest group under indictment on charges of conspiracy to defraud the Internal Revenue Service (IRS) and tax evasion. Prosecutor Justin Weddle told U.S. District Judge Lewis Kaplan that the superseding indictment brought the charges against nine men and a woman, raising to 19 the number facing trial.
  
  
• The Wall Street Journal, October 17, 2005, contains a special series of articles entitled "Living With Sarbanes-Oxley".
  
  
• Business Week carries an article for those concerned with the mining industry and corporate social responsibility by reporting on major, far-ranging innovations in Freeport-McMoran Corporation's approaches entitled, "The Mining Giant's Gutsy Human-Rights Audit May Set a Standard for Multinationals".
  
  
• A scathing, fact-filled article appears in the Financial Times, October 17, 2005, under the headline, "Britain and Nigeria's half-hearted war on corruption". This opinion article raises questions about the degree of sincerity behind the anti-corruption rhetoric of both the U.K. and Nigerian authorities. The writer is an associate fellow of Chatham House's Africa program and author of a July report titled: "Crisis in the Niger Delta: How Failures of Transparency and Accountability are Destroying the Region".
  
  

• Australia ex-corruption chief faces jail. The former acting commissioner of a corruption watchdog could be jailed for up to seven years for tipping off a public servant and friend that he was under investigation for stealing. The Australian, October 13, 2005, reported that Moira Rayner, a former human rights commissioner, was charged yesterday with attempting to pervert the course of justice in Western Australia after she admitted telling the clerk of the parliament his telephone was probably bugged. Ms Rayner will return to Perth from Melbourne next month after her extradition was authorized by the WA Director of Public Prosecutions, Robert Cock.

• Romania calls in Crown Agents from UK to help fight corruption. The Financial Times, October 12, 2005, reports that Romania is turning to Crown Agents to look at ways to root out corruption in its customs authority in an effort to complete reforms before joining the European Union. A Romanian official who asked not to be named told Financial Times that the government was weighing its options on how to clean up customs, aware that its efforts could trigger a fight with a powerful network of insiders who control the agency and benefit from its endemic corruption.Victor Alistar, director of the Romanian chapter of Transparency International, the corruption watchdog, called the customs authority the country's most corrupt institution. He says whistle blowers claim senior positions within Romanian customs are routinely sold.

• Australia ex-corruption chief faces jail. The former acting commissioner of a corruption watchdog could be jailed for up to seven years for tipping off a public servant and friend that he was under investigation for stealing. The Australian, October 13, 2005, reported that Moira Rayner, a former human rights commissioner, was charged yesterday with attempting to pervert the course of justice in Western Australia after she admitted telling the clerk of the parliament his telephone was probably bugged. Ms Rayner will return to Perth from Melbourne next month after her extradition was authorized by the WA Director of Public Prosecutions, Robert Cock.

• South African President Thabo Mbeki rounded, October 13, 2005, on corrupt members of his ruling African National Congress (ANC) who he said were contesting municipal elections just to gain access to state resources. Reuters reported that the party's dominance on South Africa's post-apartheid politics is unquestioned, but it heads into local elections due by March struggling with internal divisions triggered by Mbeki's sacking of his graft-tainted but popular deputy Jacob Zuma. In his weekly Internet letter to the party faithful Mbeki hit out at ANC members who he said planned to stand for council posts purely for material benefit.

• Google’s Eventual Top Priority – A Values Commitment. Search engine Google said it is creating Google.org , www.Google.org that company founders Sergey Brin & Larry Page bluntly declare: “We hope that someday this institution will eclipse Google itself in overall world impact by ambitiously applying innovation and significant resources to the largest of the world's problems.” The company has stated that it is making an initial philanthropic commitment of close to $1 billion. October 12, 2005 Associated Press.

• Romania calls in Crown Agents from UK to help fight corruption. The Financial Times, October 12, 2005, reports that Romania is turning to Crown Agents to look at ways to root out corruption in its customs authority in an effort to complete reforms before joining the European Union. A Romanian official who asked not to be named told Financial Times that the government was weighing its options on how to clean up customs, aware that its efforts could trigger a fight with a powerful network of insiders who control the agency and benefit from its endemic corruption.Victor Alistar, director of the Romanian chapter of Transparency International, the corruption watchdog, called the customs authority the country's most corrupt institution. He says whistle blowers claim senior positions within Romanian customs are routinely sold.

• Genetics won’t affect hiring says IBM. After media stories indicated that a landmark corporate announcement was imminent, IBM stated, October 11, 2005, "IBM promises it will not use genetic information in its employment decisions." The policy, believed to be the first of its kind for a major corporation, was announced in a letter to employees from Chairman and Chief Executive Officer Samuel J. Palmisano. “During our lifetimes, the practice of medicine and society's approach to healthcare have changed in fundamental ways. But what lies ahead — perhaps in the next decade alone — seems likely to eclipse that progress dramatically,” he wrote. He said that while work in genetics is “enormously promising,. . . [it] raises very significant issues, especially in the areas of privacy and security.” The company said consideration of the policy change started long before IBM began working with National Geographic on the Genographic Project and is unrelated. The Genographic Project is a five-year effort to collect and analyze DNA from hundreds of thousands of people in order to map how humans populated the planet. The results already constitute one of the largest genetic databases ever.
  
  

• State to let victims' families view files on Oct. 2000 Arab riots – a news story in Haaretz in Israel on October 10, 2005 highlights a critical issue of access to information and governance. The Police Investigation Department (PID) announced that it is prepared to hand over the investigative files against policemen involved in the October 2000 riots to the families of the 13 Arab demonstrators killed in the unrest. In an announcement sent to the offices of Adalah - The Legal Center for Arab Minority Rights in Israel, which represents the families, the PID declared it will agree to the families' request to give them the investigation files. In a step which prompted wide controversy, the PID decided that none of the police involved in the incidents would be brought to trial. Actions to secure greater information have been led by civil society organizations in israel, including ones supported by the New Israel Fund.

• Battle against corruption irreversible – Obasanjo Tide news in Nigeria reported on Sunday, October 9, 2005, that the President in a speech said that no Nigerian was immune from investigation and sanction over corruption. Obasanjo said that for the reform agenda to succeed the cancer or corruption had to be dealt a decisive blow. Then on October 10, 2005 the same publication followed-uop by reporting that no fewer than 37 files on corruption cases involving state governors have been referred to the Chief Justice of Nigeria, Justice Mohammed Uwais, for study with a view to appointing independent investigators, to look at the cases. This was disclosed by the outgoing Chairman of the Independent Corrupt Practices Commission (ICPC), Justice Mustapha Akanbi.

• TI Wins Case Brought by Milosevic. Transparency International announced on October 7, 2005, that it has successfully fought a civil lawsuit filed by former Serbian President Slobodan Milosevic, who sought damages for his inclusion in a list of allegedly corrupt leaders. The list was published as part of Transparency International's Global Corruption Report 2004, which had political corruption as its thematic focus. TI stated: " The case came before the state-level Berlin court (Landesgericht Berlin) on 18 August 2005. On 22 August, the court decided entirely in TI's favour. Milosevic has now let the appeal window close, indicating his tacit acceptance of the court ruling.
  
  "Justice has been served," remarked Transparency International Chairman Peter Eigen in a press release. "The court's decision was a validation of our mission and of the right of civil society to speak truth to power. Protecting this right is essential for just and democratic societies."
  
  The figure of approximately US$1 billion allegedly stolen by Milosevic was drawn from an Associated Press report. The court ruled that TI was entirely within its rights to quote from a reliable media source in the interest of raising public awareness and advocating for anti-corruption reforms. The table in the Global Corruption Report draws attention to the general issue of the misuse and sometimes outright theft of public funds by corrupt officials, and the attendant damage this causes. Leaders and civil servants often deposit such illicitly acquired funds in overseas banks. The United Nations Convention against Corruption, which will come into force in December 2005, provides a framework for recovering such funds and bringing the corrupt to justice anywhere in the world. Transparency International is grateful for the strong and professional defence it received on a pro bono basis from top-tier law firm Covington & Burling.
  
  

• "Too many laws laying seeds of corruption," runs the headline in New Straits Times (Malaysia), October 7, 2005. The article stated: "Too many laws and rules are causing unnecessary problems and laying the seeds of corruption," Datuk Dr. Sulaiman Mahbob said today. The president of the Institute of Integrity Malaysia (IIM) lamented that some of the laws in this country were introduced long before his birth, with many of them aimed at restoring peace and order at the height of the communist insurgency. "Like the Trade Licence Act 1946 that requires chicken sellers to have their licence. People in the interior of Belaga in Sarawak are forced to fly to Kuching, just to pay the RM1 licence fee," he said in a speech on the National Integrity Plan, in conjunction with the International Islamic University of Malaysia’s Integrity Enhancement Month Programme. He also referred to the outburst by the president of the Malay Contractors Association of Malaysia, Datuk Roslan Awang Chik, over the bureaucratic process that was plaguing the country’s construction industry. "Contractors cannot afford delays or they might face problems, but there are simply too many bottlenecks that can only be solved by attaching RM300 to their forms," he added.

• Transparency International wins case brought against it by former Serbian leader Milosovic - TI issues release, October 7, 2005. news.

• Awarded $2.41 Million in Arbitration Against Citigroup: October 6, 2005, The Wall Street Journal.  In a rare win for investors seeking compensation, Joseph and Beverly Salerno have been awarded $2.41 million in arbitration against Citigroup Inc. and analyst Jack Grubman.  The couple claimed that they invested $1.12 million in WorldCom Inc. stock because of Mr. Grubman’s enthusiastic recommendation of the company.  WorldCom filed for bankruptcy in July, 2002, and hundreds of National Association of Securities Dealers arbitration cases were filed against Citigroup for their allegedly tainted research.  The majority of claims have thus far been denied but the Salerno case could set a precedent.

• Case Against Former Chief Executives of ABB Ltd. Dropped: October 6, 2005.  The Wall Street Journal.  The Zurich prosecutor's office has dropped its case against former ABB Ltd. chief executives Percy Barnevik and Goeran Lindahl.  The case was in connection with the 233 million Swiss francs in pension payouts that Barnevik and Lindahl received. Although Barnevik and Lindahl have returned part of the pension money to ABB and were found to be without fault by the Zurich prosecutor, several lawsuits have been filed against former managers. 
  
  

• Disgraced Ex-President of Peru Plans to Run Again:  October 6, 2005.  The New York Times.  Alberto Fujimori, the ex-President of Peru living in self-exile in Japan, announced that he will run for the Peruvian presidency again in the elections set for next April.  However, the Peruvian ambassador to Japan has said that Fujimori, who has been charged with murder and corruption, is a fugitive and that he will be arrested if he returns to Peru.

• 1 Million in Arbitration Against Citigroup: October 6, 2005, The Wall Street Journal.  In a rare win for investors seeking compensation, Joseph and Beverly Salerno have been awarded $2.41 million in arbitration against Citigroup Inc. and analyst Jack Grubman.  The couple claimed that they invested $1.12 million in WorldCom Inc. stock because of Mr. Grubman’s enthusiastic recommendation of the company.  WorldCom filed for bankruptcy in July, 2002, and hundreds of National Association of Securities Dealers arbitration cases were filed against Citigroup for their allegedly tainted research.  The majority of claims have thus far been denied but the Salerno case could set a precedent.
  
  
• Three Accountants at Japanese Branch of PricewaterhouseCoopers Indicted:  October 3, 2005.  Kyodo News and Mainichi Daily News.  Three accountants at the ChuoAoyama, the Japanese branch of PricewaterhouseCoopers, were indicted today for falsifying accounting reports to hide billions of yen in losses for the cosmetics giant, Kanebo.  The accountants allegedly falsified reports for the 2001 and 2002 fiscal years to show that Kanebo had more assets than liabilities when in fact the company had around 80 billion yen more in liabilities than in assets.  The accountants charged with violating the Securities and Exchange Law were Kuniaki Sato, Seiichiro Tokumi, and Kazutoshi Kanda.  Investigators said former Kanebo President Takashi Hoashi and former vice-president Takashi Miyahara, approached Sato and the other suspects, and requested that the accounts be “put in the black” in order to avoid being de-listed from the stock exchange.
  
  
• United Students Against Sweatshops Begins New Campaign on Over 40 Campuses:  October 3, 2005.  United Students Against Sweatshops (USAS) began their new “Sweat Free Campus” campaign last Wednesday with demonstrations on 40 college campuses across the nation.  The students are demanding that universities force companies that license and make school apparel to buy only from suppliers that provide workers with a living wage and that respect unions.  Around five years ago, USAS groups convinced many colleges to adopt codes of conduct that made positive changes in factory standards but USAS says that a new campaign is necessary.  The campaign was renewed because of the phase-out of the Multi-Fiber Agreement in January, 2005.  The group also says that several of the factories they work with in Mexico and the Dominican Republic are threatened by a loss of orders.
  
  

• PricewaterhouseCoopers Ordered to Pay $182.9 Million in 20 Year Old Audit Case:  October 1, 2005.  Wall Street Journal.  In one of the largest judgments ever awarded in an accounting malpractice lawsuit, PricewaterhouseCoopers was order to pay $182.9 million in connection with its audits for Ambassador Insurance Co., which were done more than 20 years ago.  PricewaterhouseCoopers predecessor, Coopers & Lybrand LLP, did the audits for Ambassador Insurance Co. in the early 1980s shortly before the company collapsed.  The judgment ruled that Pricewaterhouse and the former president of Ambassador were jointly liable for the amounts awarded but the former president died years ago and the estate has no significant assets.  Therefore, Pricewaterhouse will be required to pay the full amount of the $182.9 million judgment.

• US Regulators’ Criticize KPMG Audit Work:  September 30, 2005.  Financial Times.  The Public Company Accounting Oversight Board (PCAOB) has criticized the audit work of KPMG, one of the big four accounting firms, saying that one in four of the firms audits contained “significant deficiencies.”  The announcement was a set back for the firm that is trying to rebuild its image after the admitting earlier this month that it sold fraudulent tax avoidance schemes.  The PCAOB reported that it found 19 cases with significant deficiencies and concluded that in some cases “it appeared to the inspection team that KPMG had not, at the time it issued its audit report, obtained sufficient competent evidential material to support its opinion on the company’s financial statements.”  KPMG Chairman Timothy Flynn said that while the PCAOB’s comments were “helpful,” KPMG  has reviewed the inspection findings and  concluded that only one case merited  the restatement of a client’s finances.

• China Fights Corruption in Preparation for Beijing Olympics: September 30, 2005, International Herald Tribune.  The Chinese government, in cooperation with international advisers, has introduced measures to fight corruption in preparing for the Beijing Olympics in 2008.  The government has instituted a range of new measures to prevent corruption in contracts for the Games, which it estimates will be worth up to $16 billion.  Experts say the new measures could become a blueprint for a wider campaign against graft.  The measures include more frequent audits of spending, last-minute selection of experts to decide on contract bids to reduce the possibility of bribery, threats of blacklisting for corrupt contractors, the opening of tenders to public scrutiny on the Internet and the start of public hot lines for public complaints.

• World Petroleum Council President Calls Corruption a “Special Form of Cancer” Found in Africa:  September 30, 2005.  Business Report.  At the World Petroleum Council (WPC) meeting in South Africa, the WPC President, Eivald Roren, said that African countries must rid themselves of a “culture of corruption” in order to attract further investment.  Roren said that all of the 4,000 delegates attending the conference agreed that corruption was a serious problem in oil-rich African countries and that corruption is a “special form of cancer which you unfortunately find in many African countries. It tends to set the brakes on the investment climate.”  Eivind Reiten, the chief executive of Norwegian oil and gas company Norsky Hydro, told delegates that corruption costs the world more than $1 trillion annually.
  
  

• What Did Bill Frist Know and How?  By Floyd Norris.  September 29, 2005.  Prosecutors may have trouble making insider trading charges stick against Sen. Bill Frist.  Sen. Frist’s sale of his stake in HCA Inc., a hospital chain his father founded, just before the company reported poor earnings has already led to an SEC inquiry and a complaint to the Senate Ethics committee.  In order for prosecutors to take the case farther, they will have to show that Sen. Frist used “material, nonpublic information” in his decision to sell the stock.  Since Sen. Frist denies having any such information, the prosecutors would have to find document, such as an e-mail, or obtain testimony from the person who gave him such information.  Read more of Floyd Norris’s analysis in the The New York Times online.

• DeLay Is Indicted and Forced to Step Down:  September 28, 2005.  The New York Times.  Representative Tom DeLay, the House majority leader from Texas, was indicted today by a grand jury on charges of criminal conspiracy in a campaign fund-raising scheme.  DeLay was forced to step down as the House majority leader because of the House Republican rules, which state that a member of the leadership must step down if indicted.  Representative David Dreier of California is expected to replace DeLay as the House majority leader.  DeLay is charged with a participating in a complex scheme to circumvent campaign contribution laws, which prohibits use of corporate contributions to advocate the election or defeat of state candidates. 

• Trial of Parmalat Founder Opens in Milan:  September 28, 2005.  BBC World News.  The trial of Calisto Tanzi, the founder of Parmalat Dairy, along with 15 other former Parmalat employees began on Thursday in Milan.  The group is charged with market rigging, misleading Italy’s stock market regulator, and providing false accounting.  The scandal began public almost two years, in December 2004, when Parmalat admitted that a 3.95 billion euro account that they had said was offshore in its Cayman Island subsidiary Bonlat was nonexistent.  The ensuing fallout caused Parmalat to file for bankruptcy protection and caused its 135,000 bondholders and stock market investors heavy losses.

• VP of Asian Development Bank Says 1/3 of Public Investment in Asia is Lost to Corruption:  September 28, 2005.  Xinhua News Agency.  At the fifth Asian-Pacific Regional Anti-Corruption Conference held in Beijing on Wednesday, Geert van der Linden, the vice president of the Asian Development Bank, said that 1/3 of public investment in some Asian countries is squandered on corruption.  Van der Linden also said that corruption has raised businesses costs and makes public services inadequate and exhausts citizen's assets and incomes.  To support his statement, van der Linden cited a recent World Bank survey, which shows that 36% of companies with businesses in the Asia-Pacific region regard corruption as a major hurdle to business growth.

• New Charges Plague Indian Railway Minister:  September 28, 2005.  BBC World News.  India’s Railway Minister, Laloo Prasad Yadav, faces fresh charges in a long-running corruption case that began in 1996 when he and another minister were charged with embezzling millions of dollars in what became known as the “fodder scam.”  The scam allegedly took place when Yadav was still the chief minister of Bihar.  He is charged with stealing state money intended for animal fodder and has since resigned as chief minister of Bihar (his wife, Rabri Devi, has taken his place).  Over 170 people have been charged in connection with the scam and the Central Bureau of Investigations says that as much as $143 million were siphoned from the state treasury.

• Stolen Funds in Swiss Banks Returned to Nigeria: September 27, 2005. The World Bank announced on Wednesday that it has made significant progress working with the governments of Nigeria and Switzerland towards the return of Nigerian funds in Swiss banks back to Nigeria.  The Swiss Government has already transferred $290 million of the money deposited in Swiss banks by the late Nigerian military dictator General Abacha and will return another $168 million.  World Bank President Paul Wolfowitz called the agreement a “landmark” that “sends a signal around the world that there is no safe harbor for stolen funds.”  The case sets an important precedent because it is one of the first cases of the repatriation of stolen funds.  Nigerian Finance Minister Naozi Okonjo-Iweala said that the repatriated funds will be used for poverty reduction programs. See the World Bank website for the details.

• Thales Denies Selling Arms to Saddam:  September 27, 2005. Associated Press.  The Thales Group, a French defense and electronics company, publicly denied on Monday the accusation that it has paid millions of dollars in bribes and sold chemical weapons to Saddam Hussein.  The allegations were made by Michel Josserand, the former chief executive of Thales Engineering and Consulting (THEC), in an interview with the French newspaper Le Monde.  Josserand alleges that Thales pays out between 1 and 2 percent of its global revenue in illegal commissions.  He also said Thales had "sidestepped the (U.N.) Oil for Food Program and delivered chemical weapons to Saddam Hussein's government” and took part in constructing an Iraqi chemical weapons facility disguised as a powdered milk plant. Josserand’s allegations were made after he was dismissed from his position at THEC because of irregularities in the bidding process for a contract to build a light railway in Nice.

• Interpublic’s Restatement of Earnings Brings Attention to Questionable Ad Agency Practices: September 23, 2005.  The Wall Street Journal.  As the Interpublic Group prepares to restate its earnings going back to 2000 later this month, the overseas practices of advertising agencies like Interpublic have come under fire.  The practices of ad agencies that purchase large volume orders of advertising space and receive cash back (for what is essentially a volume discount) are legal but ethically questionable because the discount is not passed on to the advertiser and the payments are not often disclosed.  Most advertisers are unaware that they must specifically ask for provisions regarding volume discounts in their European and Latin American contracts because American contracts detail ad time pricing, ensuring that discounts are passed on to the advertiser.

• Why His Peers Say Kozlowski Got Off Easy: Editorial by Floyd Norris. September 23, 2005.  The New York Times.  A new poll done by Financial Executives International along with the Zicklin School of Business at Baruch College shows that most financial executives feel that the 8-25 year prison sentence handed down to Dennis Kozlowski this week was either “about right” (60.1%) or too short (14.8%).  Colleen Cunningham, president of Financial Executives International, said that she thinks “Twenty-five years would be fair, similar to Bernie’s sentence, so they are basically spending the rest of their lives in prison.”  Executives said they lacked sympathy for Kozlowski and Ebbers because of the damage they have done to the reputations of all executives. Read the full results of the survey on the Center for Corporate Integrity website.

• US Behind Europe and Asia on Accountability:  September 22, 2005.  Fortune Magazine and the Financial Times.  According to Fortune magazine’s Global 100 Accountability list, US companies are worse at managing and accounting for their social and environmental impact than their European and Asian counterparts.  The list that was published on Thursday ranked companies like BP, Royal Dutch Shell, and HSBC in the top 10 accountable companies and companies such as Wal-Mart, AIG, and Time Warner in the bottom 20 accountable companies.  In order to determine a company’s accountability ranking, AccountAbility (who compiled the rankings for Fortune) measured non-financial factors such as stakeholder dialogue, corporate governance, and the integration of social and environmental goals into the company strategy.
  
  

• Indonesia Court Says Newmont Has Case to Answer Manado, Indonesia. Reuters - An Indonesian court on Tuesday said a unit of U.S.-based Newmont Mining Corp. and its American chief had failed to prevent the dumping of toxic waste into a bay near a now-defunct gold mine.  The presiding judge at Manado town in eastern Indonesia made the comments after rejecting a motion from the world's biggest gold miner to drop a controversial pollution case being closely watched by foreign investors and environmentalists.  The charges relate to Newmont Minahasa Raya's tailings disposal processes, which allegedly involved dumping mercury and arsenic into Buyat Bay in the Sulawesi region, making villagers sick.
  
  

• Ex-Iraqi Defense Minister to be Arrested in Connection with Disappearance of Over $1 Billion by Patrick Cockburn at The Independent September 20, 2005. The Iraqi government is expected to issue a warrant for the arrest of former Iraqi Defense Minister Hazem al-Shaalan in connection with the disappearance of over $1 billion said senior corruption investigators on Monday. The head of Iraq's Commission on Public Integrity, Radi al-Rahdi said, "What Shaalan and his ministry were responsible for is possibly the largest robbery in the world." The commission estimates that between 1.3 and 2.3 billion were siphoned off the defense budget by al-Shaalan and his colleagues.
  
  

• Ex-Tyco Executives Sentenced to 8 to 25 Years in Prison:  by Jennifer Bayot. September 19, 2005.  New York Times.  Dennis Kozlowski, the former chief executive of Tyco whose extravagant spending and pay packages at Tyco International became examples of corporate excess, was sentenced today to 8 1/3 to 25 years in state prison for stealing from his company and deceiving shareholders.  Mark Swartz, Tyco's former chief financial officer, received the same sentence for his role in the fraud.  Judge Michael J. Obus of the State Supreme Court in New York also ordered Mr. Kozlowski to pay $97 million in restitution and $70 million in fines. Mr. Swartz was ordered to pay $37 million in restitution and $35 million in fines.

• Business Ethics in China: Murdoch Criticizes China Media Policy:  September 19, 2005.  Financial Times.  At a conference in New York on Friday, Mr. Rupert Murdoch admitted that News Corp had “hit a brick wall” in China – and accused Chinese authorities of being paranoid about foreign media.  The comments were the most public and direct expression of dissatisfaction yet by an international media mogul at China. Murdoch's statement of frustration highlights the difficult ethical position of media companies operating in China who must decide to what degree they are willing to play by the Chinese government's rules.
  
  

• Court Demands Explanation of the Jailing of the Former Nepalese PM from the Corruption Commission: September 19, 2005.  BBC World News.  The Supreme Court of Nepal has demanded that within one week the corruption commission, set up by King Gyanendra after seizing power this year, explain why it jailed former Nepalese prime minister, Sher Bahadur Deuba.  Mr. Deuba was jailed along with five other in July on charges of embezzlement.  The corruption commission alleges that a contract to build an access road for a major water project was awarded to an unqualified bidder, costing the state an extra $5m but the Asian Development Bank, the largest donor to the water project, conducted a separate investigation and found no evidence of corruption.

• Whistleblower in Brazilian Corruption Scandal Expelled from Congress: September 15, 2005. Roberto Jefferson, the lawmaker who exposed major corruption in Brazil's Lula administration, was expelled from Congress late Wednesday night. He is the first person in Congress to be expelled in relation to the corruption scandal. Jefferson berated the decision in a 40-minute tirade against Lula da Silva's government saying, "I took off the emporer's clothes. I showed Brazil what Lula and the Workers' Party are." See the story on Reuters.com.
  
  
• BAE Systems Linked to £1m in Payments to Former Chilean Dictator: September 15, 2005. A Guardian newspaper investigation has revealed that Britain's biggest arms firm, BAE Systems, has been identified on US banking records as secretly paying more than £1m to General Augusto Pinochet, the former Chilean dictator. The investigation has revealed that three companies, named in a US Senate report last March as conduits for payments to Gen Pinochet, were linked to Gen Pinochet were getting money from the UK defence giant as late as June last year. The documents show that between December 1997 and October 2004 BAE paid $1,998,871 (£1.1m) in 14 payments. Please see the Guardian for the story.
  
  
• Wal-Mart Faces Sweatshop Lawsuit: September 14, 2005. Wal-Mart is facing a lawsuit in California that seeks to make the corporation legally liable for violating its own code of conduct at supplier's factories around the world. The lawsuit is brought on behalf of workers in China, Bandgladesh, Nicaragua, and Swaziland. See the Financial Times for the full story.
  

• MAS Unveils New Corporate Governance Rules for Banks and Insurers: September 8, 2005. Local banks and insurance companies in Singapore will now have to meet more rigorous corporate governance regulations. The Monetary Authority of Singapore has announced new for the definition of an independent director, composition of the board of directors, and the separation of the roles of chairman and CEO. One of the new measures announced by MAS is the stipulation that at least one-third of the board of directors must be comprised of independent directors and that a majority be independent from both management and business relationships. The chairman of the board must not be an executive director. The central bank expects to apply the new regulations to the Singapore Exchange in the future. See the Channel News for the story.

• Final Report in UN Oil for Food Investigation Calls for Reform: September 8, 2005. The final report of the investigatory committee headed by Paul Volker was released on Wednesday. The 860-page report called for extensive overhaul of the UN system and admonished the UN leadership saying that lack of oversight contributed to the spread of corruption and mismanagement in the Oil for Food program. Please see the International Herald Tribune for the story or go directly to the UN Oil for Food Inquiry website. The New York Times also has an opinion editorial.
  
  

• Yushchenko Dismisses Cabinet Following Corruption Charges: September 8, 2005. Ukrainian President Viktor Yushchenko dismissed his cabinet on Thursday amid charges of corruption. Several government aides quit their posts this week and publicly denounced Yushchenko’s government as being as corrupt as that of former Ukrainian president, Leonid Kuchma. Yushchenko has dismissed the government of the charismatic Prime Minister Yulia Tymoshenko and has accepted the resignation of the head of the Security and Defense Council, Petro Poroshenko, leaving the President with increasingly few allies. See the International Herald Tribune for the story.
  
  

• Pay-Offs, Pay-Outs – Ethical Limits? The Wall Street Journal reported September 2, 2005 that MCI Inc.’s President and Chief Executive Officer Michael Capellas will receive $39.2 million as Verizon Communications, Inc. acquires MCI. Capellas is expected to leave the merged company, which he joined just a couple of years ago when it was the then bankrupt WorldCom. The article noted other large pay-offs to CEOs as their firms are purchased. It quoted Robert M. Fields, a New York lawyer who specializes in executive pay as saying that Mr. Capellas’s exit package “is up there, but it’s not outrageous.” He said deals giving exiting executives $20 million to $50 million have become typical for large companies. The total exit package due to James Kilts, CEO of Gillette, which is being bought by Procter & Gamble has been previously reported at an estimated $185 million.
  
  
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