Latest News & Views
BROWSE THE ARCHIVES SINCE 2005
Comenting on the ranking of Russia in the TI Corruption Perceptions Index, November 2010 - "How can a country claiming to be a world leader be in such a position?" asked Yelena Panfilova, director of the Moscow office of Transparency International. "It's a situation of national shame." ...from The Washington Post, October 27, 2010.
50 best business ethics blogs and news sources - new listing from Online MBA Guide
TRACE COMPENDIUM - a compilation of summaries of international anti-bribery enforcement actions.
TRACE Global Anti-Corruption Survey 2011 - US strides ahead3, others fall back - global enforcement - See International Surveys
NIGERIA's MASSIVE SCANDAL PROMPTS BOLD DOMESTIC REACTION
The Financial Times reported on April 26, 2012, that Nigeria’s outspoken central bank governor has called for a criminal investigation into a multi-billion dollar fuel subsidy fraud. Lamido Sanusi said those responsible should not only pay back stolen funds but go to jail.
Africa’s leading oil producer lost $6.8bn as a result of the mismanagement of its controversial fuel subsidy programme from 2009 to 2011, according to a report presented to parliament on Tuesday. Xian Rice of The Financial Times in lagos reported on April 25 that Ngeria lost $6.8bn because of corruption and mismanagement of its controversial fuel subsidy programme from 2009 to 2011, according to a report presented to parliament on Tuesday. Though high-level graft has been rampant for decades in Nigeria, the scale and details of alleged malpractices revealed in recent days have created uproar. Lawmakers shouted over one another when the report was discussed on Tuesday and some stormed out of the session, which was carried live on television.
INDIAN CORRUPTION - A TORCH HAS BEEN LIT
“You have lit a torch against corruption,” said Anna Hazare, 74, on his release from prison in New Delhi on August 19, 2011. He told well-wishers “Don’t extinguish it until India is free from corruption...If I live or not, keep the torch alight.” Denounced by top Indian Government officials, the campaigner has a vast following and is forcing core issues of governance and justice in a country where corruption is widely perceived to be rife.
Raj Sapru, Director, Advisory Services, at Business for Social Responsibility (BSR), brings together two critical concepts of value to all corproate leaders concerned with quality and with sustainability. Below is a short excerpt from his excellent new essay.
There are signs of the quality and CSR disciplines converging, in particular with the release of the ISO 26000 Guidance on Social Responsibility. The international standard encourages companies to make a voluntary commitment to social responsibility and provides common guidance on concepts, definitions, and methods for evaluating those efforts. ISO 26000 will attract the attention of those invested in other ISO frameworks such as ISO 9000.
Like CSR, quality is based on a core set of values, such as “do no harm,” “create zero waste,” “make external costs visible,” and “drive out fear” between management and employees... Like CSR, quality also has a strong focus on people—not just in terms of customer satisfaction, but related to the quality of working life and employee satisfaction.
The two disciplines also share several important concepts:
- Making hidden costs visible: From a quality perspective, hidden costs related to wasted materials, wasted energy, distracted employees, dissatisfied customers, and poorly performing products can amount to 10 to 40 percent of total costs. Similarly, CSR might use lifecycle approaches to highlight costs buried deep in the value chain, like supplier and consumer energy use for the manufacture and operation of products. This idea is already taking hold, with 86 percent of CEOs viewing “accurate valuation by investors of sustainability as important to reaching a tipping point in sustainability,” according to a UN Global Compact report.
- Corporate governance: In quality, senior management holds complete responsibility for quality problems, and quality is made in the boardroom. The majority of quality problems are the fault of poor management rather than poor workmanship. Likewise, CSR success is directly related to CEO commitment.
- Empowerment: “Quality at the source” refers to an approach in which workers are given the authority to stop a production line if there is a quality problem or offer a customer an on-the-spot refund if the service is not satisfactory. Empowerment is also a primary pillar in promoting supply chain sustainability. The promotion of an informed, participatory workplace helps ensure fair working conditions.
- From reactive to proactive: In quality, prevention and continuous improvement are more effective than inspection. And in sustainability, supply chain monitoring approaches used alone fail to address root causes for social and environmental challenges.
- Internal alignment: According to the total quality approach, each department views other departments as internal customers, causing barriers to fall. This kind of cross-functional approach is useful in identifying and managing CSR issues. Both quality and sustainability, therefore, encourage internal collaboration both vertically (from the CEO level to the factory floor) and horizontally (across departmental silos).
Libya’s oil must now be used to drive development and foster peace
Unfrozen Libyan assets must be managed in an open and transparent way
With Colonel Gaddafi’s 42 year dictatorship apparently drawing to a close, the Libyan National Transitional Council (NTC) and supporting countries must put measures in place to guard against a Libyan “oil grab” and ensure the Libyan people benefit fully from the exploitation of Libya’s natural resources, said Global Witness today.
Libya’s oil sector has been abused for decades by the small elite surrounding Gaddafi, with oil revenues enabling Gaddafi to keep a grip on power for 42 years. A transparently managed oil sector could prove the catalyst for much-needed development and stability in the country. But any perception that the rebels or NATO countries have their own designs on Libya’s oil could stir further division and conflict.
“Libya currently stands at a crossroads in several senses – one of the best ways to ensure it takes the path of peace and prosperity is to bring transparency to its oil sector,” said Brendan O’Donnell, Senior Oil Campaigner at Global Witness. “By drawing a line under Gaddafi-era corruption and the mismanagement of public wealth, the NTC could champion resource justice in the transitional constitution and set a great precedent for Libya’s future.”
Several actions must be taken to guarantee that oil and public funds benefit the Libyan people:
· No new oil concessions should be brokered until an elected government is in place. Any deals at this time could raise concerns within Libya that international support for the NTC is driven by a desire for access to oil rather than for the benefit of the Libyan people. The NTC is likely to have to honour Qaddafi-era contracts in order to get oil revenues flowing. But no new deals for the exploration or exploitation of oil fields should be considered until an elected government can review existing rules and laws to ensure robust transparency and accountability, The Libya contact group should use its influence to ensure that companies in their markets do not attempt to broker deals at this time.
· Concrete transparency provisions should be written into the transitional constitution to ensure the just exploitation of Libya's natural resources.These should require the public disclosure of how Libya manages its oil sector and disclosure of all revenues associated with it.
· Public finances including unfrozen assets, funds raised against frozen assets, resource trading and aid should be made open to public scrutiny.The terms of existing oil contracts should also be disclosed and details of agreements made by the NTC with governments and companies involving sovereign funds or the exchange of cash, crude oil or 'IOUs' secured against frozen assets should be made public and open to scrutiny by Libyan civil society and NGOs. This is particularly important as the UN, EU and others start to unfreeze and return billions of dollars of Libyan assets held overseas.
· All funds should be released through a transparent mechanism such as a strengthened Temporary Finance Mechanism which was set-up by the NTC and the Libya Contact Group to manage aid flows.
· Governments should assist the NTC to track down and recover the funds that Gaddafi and his cronies looted from the state, and punish those banks that accepted this money.
“Our experience shows that once bad financial practice is established in a fragile state, it takes decades to undo. Libya is a small country with a lot of oil – its people should prosper from their wealth, but this may not happen unless the transition phase is managed openly,” continued O’Donnell. “Both the NTC and the Libya Contact Group have a responsibility to take all necessary steps to ensure that the people of Libya benefit fully from their country’s wealth.”
Transparency International publishes a major report on corruption and climate change.
"The urgent need to respond to climate change needs to be enhanced by transparency and accountability. Oversight must be built into all climate-related initiatives from the start," said Huguette Labelle, chair of Transparency International. "Good governance now will help ensure the success of the impact of climate change policy and funding."
"Bangladesh is at the frontline in the battle to combat climate change. How Bangladesh manages climate governance and ensures transparency and accountability in the use of climate change funds can provide lessons for governments and civil society around the world. The recommendations in the report come at a critical time," says Iftekhar Zaman, executive director of Transparency International Bangladesh.
Under global climate agreements, substantial new funding from governments and multilateral agencies will be made available to finance mitigation of climate change, such as renewable energy projects like wind farms or solar power plants, and adaptation to it, such as constructions of sea walls, irrigations systems and disaster-ready housing.
None of the 20 countries expected to be most affected by climate change – where much of this money will be spent - scores higher than 3.6 on the TI's Corruption Perceptions Index, in which 0 indicates perception of extremely corrupt and 10 is very clean. Governments must ensure transparent oversight of how climate change funds are spent, which can be enhanced by civil society monitoring.
The report combines analysis from more than 50 leading climate change experts from 20 countries tackling a wide range of issues including:
- the politics of climate change and accountability of funding institutions
- the role of the private sector
- the integrity of carbon markets
- the response to climate change impacts in developing countries (climate-proofing infrastructure, preparing for climate migration and improving disaster management)
- Forestry governance
The report warns of the risk of a green resource curse. New technologies needed to replace fossil fuels, such as solar panels, require different natural resources. It is important that the mining industry that exploits these resources is transparent and publicly discloses payments to governments so that citizens can ensure the proceeds are used for their benefits.
Similarly, governments that sell land for bio-fuel cultivation, estimated to be 10 per cent of transport fuels in many of the world's leading economies by 2030, must allow for public participation and oversight so that local communities' land rights are respected.
UK Government Delays Implementing Anti-Bribery Law - TI-UK Reacts "Disastrous news.."
The U.K. government on January 31 said it had delayed implementing a new anti-bribery law that was due to come into force in April following protests from businesses worried about which companies would be covered by it and what actions could be interpreted as bribery. A Justice Ministry statement noted the government will release new details on the legislation in "due course... "We are working on the guidance to make it practical and comprehensive for business.".
Chandrashekhar Krishnan, Executive Director of Transparency International UK, said: ‘This is disastrous news. Last July, the Government committed to publishing its Guidance to
companies early in the new year so the Bribery Act would come into force in April 2011. The
Government has failed to fulfil that commitment. Even worse, it is not prepared to confirm a
revised time frame.
"‘This raises serious doubts about the credibility of the Government’s commitment to the
Bribery Act, which was passed in the last Parliament on the basis of an all-party consensus.
The Act is a robust piece of legislation that will help to level the playing field for the vast
majority of UK companies that want to conduct their business in an ethical manner. This
delay creates unnecessary uncertainty for these companies and exposes the Government to international criticism that it is not serious about combating corruption’.
January 31 - New Delhi - Thousands of people on Sunday marched through several Indian cities to protest government corruption and demand an effective anti-graft law, the Hindustan Times reported.
- January 31 – The Daily Telegraph reported - Kabul Bank losses spark fears of huge Afghan corruption and financial crisis. Losses at Afghanistan's largest bank due to a spree of bad loans to government cronies could be three times higher than originally feared and finally total £580 million.
New Swiss Anti-Money Laundering Law Takes Effect Ffebruary 1. Swiss Info reported on January 19 that five days after he fled his country, Switzerland froze accounts and assets connected to deposed Tunisian President Zine al-Abidine Ben Ali. The seven-member cabinet also agreed to freeze any assets belonging to Laurent Gbagbo of Ivory Coast, who is clinging to power despite having lost a presidential election to Alassane Ouattara in November.
Key Global Fund aiding HIV/Aids, TB and malaria victims in Africa accused of alleged corruption.
The BBC reported on January 27, 2011, that the German Government has halted payments to the United Nations supported Global Fund. The BBC reports that, “media reports speculate that billions of dollars may have been siphoned off” from the Fund.
German Development Minister Dirk Niebel said, "I take the allegations of corruption and breach of trust carried by media against the Global Fund very seriously, and I expect that the fund will promptly clear them up." He added, "I have halted all further payments to the fund until it is fully cleared up."
Jon Liden, a spokesman for the Global Fund, confirmed to the BBC that the misuse of some $34m of funds had been uncovered in nine countries by the Fund's own inspector general, following investigations in 33 of the 145 countries the Fund is active in. He said the most grievous instances of fraud had been found in Mali, Mauritania, Djibouti and Zambia - but said in three of those cases it was the Fund's own regular audits which picked up the irregularities, and that they had been made public over previous months by the Fund itself. He acknowledged that there "are probably more instances of misuse to be uncovered", but said media reports suggesting the sums concerned could amount to billions were likely to be wildly inaccurate. He said corruption was a "necessary risk" the Fund had to take when disbursing funds in countries racked by poverty and war, and claimed the Fund had saved more than seven million lives.
Was Bad Corporate Governance Responsible for the Financial Crisis?
Yes, in large measure, according to a report by the Democratic Party majority of the 10-member US Congressional “Financial Crisis Inquiry Commission”. Blame is also assigned to financial regulators and credit rating agencies.
According to a report by Reuters, “The financial crisis could have been avoided and was the result of poor decision making both in Washington and at top financial firms that fostered a culture of excessive risk taking.” The Democrats in their report said, "We conclude this financial crisis was avoidable," the report said.
In terms of major financial institutions, the Democrats assert that they found "stunning instances of governance breakdowns and irresponsibility." Reuters said that among those singled out are American International Group, mortgage giant Fannie Mae and Merrill Lynch.
What is surprising about this report is that, despite the tough language on who to blame, it appears to offer little that is new. The three firms highlighted above all have different chief executives and ownership structures from the pre-crisis days of 2007.
At the same time, many major financial services firms have undertaken internal reviews of their risk management approaches, including Board supervision.
"Less than a 3 percent drop in asset values could wipe out a firm," according to the report. The report criticized credit rating agencies such as Moody's Corp, McGraw-Hill Cos' Standard & Poor's and Fimalac SA's Fitch Ratings for giving "their seal of approval" to securities that proved to be far more risky than advertised because they were backed by mortgages provided to borrowers who were unable to make payments on their loans.
True transparency is about more than spilling the beans
By Katherine V. Smith, Executive Director, Boston College Center
Today’s media often characterize our networked information age as the age of transparency. Transparency can be a euphemism for lack of control over information and the public narrative about our business or ourselves. More ideally, it can be a mindful business strategy for approaching decisions and actions with the intention of communicating proactively and honestly about what is being done and why.
This requires us to address directly issues that may present conflicting interests and values. That’s not easy, especially in an environment made ever more complex by increased scrutiny of ever greater numbers of people – people who may either stay at the surface of an issue or suddenly and in vast numbers dive deep into one of its dimensions.
As I read a recent story about how financial institutions are bracing for a potential new wave of information leaks, two thoughts occurred to me:
Being leaky is not the same as being transparent.
As a society we are in the midst of an information technology revolution that is moving so fast we have not yet caught up to understand its potential impacts.
It seems that (in parallel with the progress of the 21st century) we are in our “tweens” and headed toward a kind of social adolescence. As is often the case with those only approaching maturity, we don’t always see how we are affected by the forces of development and therefore clumsy at times in how we deal with it.
Being leaky implies there are holes in an otherwise seamless container or closed system that holds its contents intact and safe from exposure, only to be dispensed in increments as decided by the owner of the vessel. When breaches occur, they cause the contents (the proverbial beans) to be spilled at our feet while creating opportunities for others to look into the container. If we think about information as the content, it is clear that the power of information technology has compromised any company’s or individual’s ultimate control of its story or message. Narratives will be weaved in increasingly communal ways, with multiple, sometimes conflicting versions that are retold and revised on an ongoing basis.
Einstein noted that information is not knowledge. A state of historical amnesia exists today because the amount of information we experience leaves us intellectually immobilized by the fatigue that results from trying to process the volume and velocity. Faced with this paralysis we give ourselves permission to look away from the torrent of bytes that flow past and stay at the surface. The challenge of our new era of transparency is to be able to know what to pay attention to, what to discard, what requires action, what requires protection.
It won’t be easy. In a year when, Facebook’s users number 500 million (up from 5 million in 2007), its valuation has topped $50 billion (up from its approximate valuation of $30 billion just six months ago), and founder Mark Zuckerberg is the Man of the Year; Wikileaks’ Julian Assange continues to garner major headlines and you cannot live a professional day without encountering a tweet, a post, a link, or a leak, we are undoubtedly in a new era. Social networks, knowledge communities such as wikis, and ever-faster-cheaper-better – and more mobile – technology contribute to the volume of data and information available and the velocity at which they travel. There are many benefits to our ability to connect with each other more easily and there are also challenges and risks for business to manage.
In this decade, which can be considered this century’s “adolescence” we need to emerge a stronger and more engaged society. Business has a tremendous opportunity to facilitate this engagement. Being transparent implies that our system is open, or at least accessible, and that we are receiving as well as offering knowledge and learning about our actions and our products. Owners, stakeholders and customers may add to this understanding or learn from it. This state of being requires us to start our decision making processes in fundamentally different ways that could bring positive and radical transformation to the quality of all of our lives.
How is our community fundamentally different if it is based on interests and affinity rather than on geography? What is gained? What is lost? How might our decision-making and behavior change if we accept up front that they are fair game for broad public consumption? Will our business decisions change? How would we measure and report success? Over what time frames?
These are all puzzling questions. Share your thoughts here about where we might find the answers and what are the greatest opportunities and challenges they pose for business.
LEADING FORMER CONGRESSMAN FOUND GUILTY AND SENTENCED TO PRISON - Tom DeLay -- once one of America's most powerful politicians - the former top Republican Party leader and majority leader of the House of Representatives, was sentenced to three years in prison for money laundering and conspiracy stemming from his role in a scheme to channel corporate contributions to Texas state races in 2002. He was released pending an appeal and he claims he did no wrong. But, the jury guilty verdict and the sentence will create a wave of investigations and debate in Texas on just how political campaigns are really funded.
Verdict Against Khodorkovsky in Russia Raises Profound Rule of Law issues - White House Issues Unprecedented Rebuke
The guilty verdict in the second trial of Russia's best known prisoner sparked protests outside a Moscow court overnight and drew immediate international condemnation. The US secretary of state said Mikhail Khodorkovsky's conviction raises serious questions about the rule of law in Russia. The German foreign minister called it a "step backward" for Russia. And the British foreign office said the law should be applied in a "non-discriminatory and proportional way". Mikhail Khodorkovsky was once Russia's richest oil tycoon who fell out with the Russian prime minister, Vladimir Putin, when he backed opposition politicians. He has been in jail for tax evasion since 2003 and has now been found guilty of embezzlement.
Statement by the White House Press Secretary, 12/27/2010.
We are deeply concerned that a Russian judge today has indicated that for a second time Mikhail Khodorkovsky and Platon Lebedev will be convicted. We are troubled by the allegations of serious due process violations, and what appears to be an abusive use of the legal system for improper ends. The apparent selective application of the law to these individuals undermines Russia’s reputation as a country committed to deepening the rule of law. The Russian government cannot nurture a modern economy without also developing an independent judiciary that serves as an instrument for furthering economic growth, ensuring equal treatment under the law, and advancing justice in a predictable and fair way.
The Obama administration stands in solidarity with the many people in the Russian government, in the legal system, and in civil society who are committed to strengthening the rule of law and deepening the commitment to universal values enshrined in the Russian constitution. Russia’s failure to keep this commitment to universal values, including the rule of law, impedes its own modernization and ability to deepen its ties with the United States.
President Obama has spoken frequently with President Medvedev about this case and others as part of their ongoing conversation about President Medvedev’s important campaign to strengthen the rule of law and modernize Russia’s political and economic system. We will continue to monitor closely the next stages in this case, including the fairness of the sentences and the review by higher courts during the appeals process.
MOSCOW REACTS: Associated Press
, 12/27/2010 -
Russia's Foreign Ministry has angrily rejected Western criticism of jailed oil tycoon Mikhail Khodorkovsky's conviction in a second criminal case, saying it amounted to pressuring the court.
SUSTAINABILITY Cancun's Depressing Climate Change Conference Strengthens the Case for Business to Show Ethical-Environmental Leadership. From the pen of Geoff Lye: "To borrow the title of John Elkington and Pamela Hartigan’s 2008 book The Power of Unreasonable People, perhaps the time has come to call on Unreasonable CEOs to step up to the challenge. Unlike democratic governments, CEOs can lead and inspire rapid and massive actions to reduce emissions. Just consider how quickly WalMart has moved from a slow follower to global business leader in squeezing carbon out of its supply chain; no government could move as quickly or as efficiently. And Unilever’s Paul Polman’s recent pledge to double their business while halving their environmental footprint is nothing less than a paradigm shift in their underlying business model. (see full article)
Auditing Firm Charged with Complicity in Major Financial Crisis Fraud
reported December 22, 2010 that New York Attorney General Andrew Cuomo has brought a suit seeking over $150 million against Ernst & Young for allegedly participating with its former client, Lehman Brothers, which went bankrupt in September 2008, in what Cuomo contended "was a massive accounting fraud."
Sudanese President Omar-al-Bashir “has siphoned as much as $9bn out of his impoverished country, and much of it may be stashed in London banks,” according to Wikileaks as reported in The Guardian (UK), Dec.17, 2010.
INDIA -- Telecom Crisis Spreads. The governing coalition is stressed as allegations swirl and, as The Hindu, reported on December 15: the Central Bureau of Investigation (CBI) raided residences and offices across the country, including those of associates of former Telecom Minister A. Raja and DMK MP Kanimozhi in connection with the 2G Spectrum allocation scam. As part of its ongoing probe into 2G spectrum scam, the Central Bureau of Investigation (CBI) on Wednesday carried out searches in Delhi, Noida and Tamil Nadu at the premises of several companies, their directors and the former Telecom Regulatory Authority of India (TRAI) Chairman. Congress Party President Sonia Gandhi is speaking out against corruption see India Today
NIGERIA -- CHENEY CHARGED --- authorities have filed charges against former US Vice President Richard Cheney (AFP). They charge that when he was the Chairman and CEO of Halliburton in the 1990s, the company and its wholly owned subsidiary KBR conspired to pay $180 million in bribes to officials in Nigeria in order to secure around $2 billion of business contracts. The case is interesting because Haliburton agreed to settle similar charges with both the US Justice Department and the Securities and Exchange Commission in what was the largest corporate fine ever for a violation of the US Foreign Corrupt Practices Act. However, the US official charges against the firm never mentioned Cheney. The former KBR chief, Albert Stanley is serving a 7 year prison term in Texas. UPDATE: Bloomberg reported on December “The charges against Dick Cheney and all the others were dropped today,” Femi Babafemi said in a telephone interview in Abuja, the capital. Halliburton, where Cheney was chief executive officer until 2000, offered to pay $120 million in fines and repatriate an additional $130 million to Nigeria, he said. A person who answered a call to Halliburton’s Houston office said no one was available to comment.
The release of Aung San Suu Kyi brings hope.
Released from house arrest on November 13 release - she has spent 15 of her past 21 years in jail. In an opinion article in The Financial Times, November 22, 2010, Nobel economist Amartya Sen wrote of Burma in part: "The situation has remained terrible for so long that there is now a kind of defeatism that makes frustrated well-wishers eager to be thrilled by little mercies. So while Aung San Suu Kyi’s release from unjust confinement is a great moment for celebration, it is also a time to think clearly about what the world can do to help her cause."
PTF develops new website
Anabel Cruz, Chair of the Partnership for Transparency Fund reports on PTF's busiest year.
"We have come far over the last 10 years and expect to expand our activities significantly over the next five years across the developing world," said Anabel Cruz, Chair of the Board of Directors of the Partnership for Transparency Fund (PTF) on the publication of PTF's 2009 Annual Report. Over the last decade PTF has made available over US $2.5 million in small grants in support of 148 anti-corruption projects undertaken by civil society organizations in 44 countries. PTF President, Pierre Landell-Mills, stressed that 2009 was PTF's busiest year. Not only were more than 30 new grants approved, almost double the 2008 total, but PTF negotiated a major new $3 million dollar grant from the Japanese Social Development Fund (JSDF) and undertook an important study of the global experience in supporting the demand for good governance. 2009 saw the launch of its South Asia program in partnership with the Public Affairs Center in Bangalore.
Clare Short to Chair EITI
The Board of Directors of the Extractive Industries Transparency Initiative (EITI) will nominate former UK Development Minister Clare Short to succeed Peter Eigen as the EITI Chair. The hand-over will take place at the EITI’s global membership meeting in March, 2011.
Peter Eigen is a founder of EITI, which brings together government, business and civil society to enhance transparency and accountability in the oil, gas and mining sectors across the world. He has served as the Chair since the establishment of the organization in 2006.
Clare Short had a long career as a Labour Party Member of Parliament, serving as the aid minister in the Tony Blair government ffrom 1997 to 2003. She did not seek reelection in 2010. She became a so-called “Independent Labour MP” in 2005. Her resignatuion in 2003 from the Blair Government created a maqjor public dispuite, as she assailed the PM for was after a public dispute with PM Blair over the UK’s policy to join the US in the invasion of Iraq, which she strongly disagreed with.
Ms. Short has often been outspoken and controversial. Not only did she protest the UK’s Iraq policies, but she has long been a forceful critic of the Israeli Government's stance on Gaza and the Palestinian Territories.
More Trouble for BAE Systems as Bribery Deal Challenged in UK Court and as Accounting Cover-Up of Bribes Leads to Guilty Plea
November 25, 2010 - Bloomberg ---BAE Systems Admits Guilt in U.K. Accounting Case, Faces December Hearing - BAE Systems Plc, Europe’s biggest defense company, said it failed to keep proper accounting records of payments in a case that tests U.K. fraud prosecutors’ ability to negotiate plea deals.
November 23 - London - Corner House, which has been active in challenging the UK Government's handling of the BAE foreign bribery allegations for years, reported that Arms company BAE Systems today pleaded guilty at the City of Westminster magistrates court in London to minor charges of false accounting relating to its controversial sale of military radar equipment to Tanzania in 1999. The sale has been surrounded by allegations of corruption. BAE and the Serious Fraud Office (SFO), which was investigating the corruption allegations, announced in February 2010 that they had reached a “plea bargain” settlement under which BAE would plead guilty to the accounting misdemeanours. After BAE entered its guilty plea, District Judge Caroline Tubbs gave permission for the plea bargain settlement to be heard at the higher Southwark Crown Court on Monday 20 December. At this unprecedented hearing, the judge, Mr Justice Bean, will be asked to confirm the final settlement. The single criminal offence against BAE, presented by SFO lawyer Louis Mably, was brought under section 221 of the Companies Act 1985 concerning a corporation's "duty to keep accounting records".
« BIENS MAL ACQUIS » CASE: FRENCH SUPREME COURT OVERRULES COURT OF APPEAL’S DECISION
A Major Victory for the Campaign to Expose Plundered Assets – TI-France together with SHERPA: Highest French Court Rules to Admit Complaint. The decision stands as a considerable legal milestone. For the first time in France, the collective action of an anti-corruption association is deemed admissible before a criminal court.
The criminal chamber of the Supreme Court (Cour de Cassation) ruled in a corruption case calling for an investigation into how luxury assets (properties and cars, as well as bank accounts) were acquired in France by three foreign heads of state - Denis SASSOU NGUESSO (Congo-Brazzaville), Omar BONGO ONDIMBA (Gabon, now deceased), Téodoro OBIANG MBASOGO (Equatorial Guinea) - and their relatives.
The Supreme Court has overruled the decision handed down one year ago by the Paris Court of Appeal by ruling the complaint filed by TI France on December 2nd 2008 is admissible. The Supreme Court’s decision will allow the appointment of an investigating judge and the opening of a judicial inquiry. This judge will have to determine the conditions under which the assets in question were acquired, as well as how the numerous bank accounts identified by the police were accumulated. The inquiry should also shed light on the role played by various intermediaries who might have facilitated operations identified as suspect by the French police. First among those are the banking institutions which were identified by the investigations, and whose respect for their anti-laundering obligations one can only question. (Also please see Gabon winner of TI-Integrity Award 2010). November 9, 2010.
The 2010 Annual Membership of Transparency International condemned "the coward and violent attacks against journalists and civic activists everywhere. Specifically, we are appalled at the latest brutal attack against Oleg Kashin, journalist of Kommersant Daily. Such attacks threaten press freedom and civic activism and cannot be tolerated. We call upon law enforcement authorities in Russia to conduct a thorough investigation of all such cases and to undertake all possible measures to prevent such attacks from happening in the future."
The Annual Meeting also resolved: "To establish an Amalia Kostanyan award recognizing excellence within the TI anti-corruption movement. Amalia Kostanyan was the chair of TI Armenia , a real hero and an active member of the UNCAC Coalition, who died suddenly last September while engaged in the work that characterized her selfless and fearless contribution to the fight against corruption. The Amalia Kostanyan Award will keep her memory alive and will honour other heroes, people of integrity and courage, within the Transparency International movement. The selection process would be similar to the one applied for selection of the TI Integrity Award winners." (November 9, 2010)
UNITED NATIONS CONFRONTS HUMANITARIAN DISASTER
OXFAM AMERICA REPORTS
Ten years after world leaders committed to halve world hunger by 2015, little progress has been made to reduce the number of people who go to sleep hungry, and many hard-won achievements have been undone by the global economic, food and fuel crises, according to a new report from Oxfam America.
“The fact that 925 million people are hungry is a scandal when the world has enough food and money to ensure that all have enough to eat. The food crisis has not gone away, it’s happening every day for these people,” said Gawain Kripke, Policy Director for Oxfam America.
The launch of “Halving Hunger: Still Possible” coincides with an announcement by the UN Food and Agriculture Committee (FAO) that the number of hungry people worldwide has dropped by 98 million to 925 million in the past year. This is good news and a welcome reversal of the upward trend in hunger in recent years. However, it’s not nearly enough progress to meet goals set in 2005. In the ten years since the MDGs were agreed, the proportion of hungry people in the world has decreased by just half a percent - from 14 percent in 2000 to 13.5 per cent today.
However it warns that the decline is incidental, due largely to two years of good harvests which had, until recently, led to a fall in global food prices. The policies and increased investment which are needed to address the underlying causes of hunger remain unfulfilled.
Oxfam called on President Obama and other world leaders to create a rescue package to save the MDG goals - including cutting hunger - at an upcoming summit in New York. This will require pursuing a twin-track approach; needs of vulnerable populations must be met in the short term, while poor countries are enabled to develop long term agricultural production through investments in small producers, especially women.
To achieve these goals by 2015, Oxfam estimates that an annual increase of $75 billion is needed to tackle hunger and malnutrition.
From The Financial Times
Transparency on extractive industries will help beat corruption
Published: August 24 2010.
From Mr Frank Vogl
Sir, Several recent articles have drawn attention to key developments in bringing to light corruption in African extractive industries. New US legislation may now lead to a quantum leap in replacing the opacity that clouds this sector with transparency.
Tucked into the new US financial reform law that President Barack Obama recently signed are provisions that require US companies in the oil, gas and mining businesses to file independently audited statements on their payments to foreign governments to the Securities and Exchange Commission.
Much of the credit for the latest breakthrough goes to the Publish What You Pay coalition of more than 600 civil society organisations and to one of its prime supporters, philanthropist George Soros, who weighed in to push for the recent US legislation.
Research by Global Witness in the UK, among others, has also contributed greatly to public understanding of just why the leaders of so many natural resource rich African countries are so wealthy and their citizens are among the world’s poorest peoples.
Further efforts will be made by civil society to force still greater transparency in the extractive industries’ sector. They are likely to push harder for constructive approaches by host governments and companies within the forum of the Extractive Industries Transparency Initiative, which brings all parties together.
What is now essential, however, is that the major minerals’ importing countries should now redouble their efforts to curb the rampant corruption pursued by the leaders of such exporting countries as Angola, the Democratic Republic of Congo, Equatorial Guinea and Zimbabwe, to name just a few.
Necessary measures include enforcing tough constraints on the global sale of “conflict minerals” and strengthening anti-money-laundering approaches. More important still, given the recent Toronto Group of 20 pledge in June to report at the G20 summit in Seoul in November on new anti-corruption actions, every effort should be made to ensure that all governments follow the new US lead and force their companies to disclose payments to governments in the oil, gas and mining sectors – including such G20 members as China, France, Russia, Saudi Arabia and the UK.
Published with permission from The Financial Times
Former Illinois Governor Rod Blagojevich found guilty by Chicago jury of just one out of 24 corruption charges - Judge declares mistrial - prosecutors to retry.
Securities & Exchange Commission Set to Force New Era of Corporate Disclosure - Compensation Seen as Key Focus SEC Commission Chairman Mary L. Schapiro discusses the new US financial reform legislation and the SEC actions now...
July 27, 2010
This law creates a new, more effective regulatory structure, fills a host of regulatory gaps, brings greater public transparency and market accountability to the financial system and gives investors important protections and greater input into corporate governance. I believe the Act, especially when fully implemented, will bring us closer to a goal we all share: namely, more stable financial markets that better protect investors and facilitate the capital formation on which our workers, investors, companies and economic growth rely.
… Corporate Disclosure: we will be adopting many rules in this area—especially in the area of executive compensation.
Advisory say-on-pay votes will be required at all companies at least once every three years. Shareholders will have a similar say on golden parachutes that provide payments to executives in the wake of mergers, acquisitions and major asset transactions.
Companies will be required to calculate and disclose the median total compensation of all employees and the ratio of CEO compensation to that of employees. The relationship between senior executives' compensation and the company's financial performance will also be calculated and graphed for shareholders' information.
In addition, companies will be required to develop "clawback" policies for reclaiming incentive-based compensation from current and former executive officers after a material financial restatement. And rules governing when brokers can vote proxies without instruction from beneficial holders will be revised further so brokers cannot vote on compensation matters—like the new say-on-pay requirement—or other significant matters that the Commission determines by rule.
What is Going On at the United Nations ?
Associated Press reported on August 9, 2010, that Secretary-General Ban Ki-moon has called stinging criticism leveled by two former senior U.N. officials as "unfair." in his first statement after accusations of failing to combat UN corruption, he said, "If anybody, or any member state within the U.N. system, or any colleague of mine in the U.N. secretariat accuses me on the issue of accountability, or ethics, then I regard it as unfair. It was I who have taken this accountability, and the highest standard of ethics by the U.N. secretariat has been held from day one."What is going on at the United Nations?...continuation of story fro m HOME page...
Two times in the past month top U.N. officials who were in charge of fighting corruption within the world body have blasted Ban's leadership and accused him of leaving the oversight agency in tatters by ignoring U.N. hiring rules that require filling vacancies based on experience and qualifications. Inga-Britt Ahlenius, the Swedish former auditor general who stepped down as U.N. undersecretary-general for oversight last month, detailed her frustrations with Ban in a 50-page confidential "end-of-assignment" report, largely blamed Ban for the mess that she said she was unable to fix at the Office of Internal Oversight Services that she headed since mid-2005, because Ban nine times blocked her from hiring a highly respected former U.S. prosecutor as permanent head of the investigation division.
American prosecutor, Robert Appleton, has filed a 76-page grievance accusing Ban of blocking his hiring to the U.N.'s top investigative post because of discrimination based on gender and nationality. Appleton headed the U.N.'s special white collar fraud unit, known as the Procurement Task Force, from 2006 to 2008.
INSIGHT: A Remarkable Wall Street Journal Article on Money Laundering and Corruption in Afghanistan -
Wall Street Journal reporter Matthew Rosenberg has written a remarkable story - “Afghanistan Money Probe Hits Close to the President” in the August 12 2010 edition of his newspaper. It provides a detailed insight into (a) the possible scale of international money laundering that is transacted via Kabul; (b) the range of possible beneficiaries of these transactions; (c) the substantial skills of U.S. trained Afghan investigators; (d) the potential risks of the investigations being closed by the Afghan government because the findings may well implicate very senior politicians and officials; and (e) the tensions between the U.S. and Afghan governments over how these investigations are handled.
This is important because in November 2009 President Obama publicly decried fraud in the presidential elections in Afghanistan. Thereafter, the U.S. President and Secretary of State Hilary Clinton stressed repeatedly in public their concerns about corruption in Afghanistan. This is unprecedented – never before have major world leaders been so critical of a foreign allied government at a time of war over the issue of governmental corruption. In the course of the first six months of 2010 there have been U.S. Congressional investigations into aspects of alleged corruption in Afghanistan, there has been outstanding corruption reporting, notably by The Wall Street Journal and The New York Times, but there has also been concern that President Obama’s comments amount to little more than empty rhetoric.
Mr. Rosenberg’s article suggests that the U.S. President’s admonitions were followed-up with effective efforts by U.S. FBI and other officials to train Afghan anti-corruption investigators and that this in turn is now leading to a set of critical, top level, issues. The reporter provides extensive detail.
The Wall Street Journal article reports that U.S.-trained agents from an Afghan anti-corruption task force raided the headquarters of Afghanistan’s largest "hawala" money-transfer business, the New Ansari Exchange, on January 14 of this year and took away “Tens of thousands of pages of documents.” These showed that the company allegedly was helping to launder profits from the illicit opium trade and moving money earned by the Taliban through extortion and drug trafficking. Links were also said to have been found to money transfers for “some of the most powerful political and business figures in the country, including relatives of Mr. Karzai.”
The article stated, “The New Ansari probe is now threatening to disrupt relations between the Afghan president and his U.S. allies. Last week, Mr. Karzai took more direct control of the task force that staged the raid, the Sensitive Investigative Unit, and another U.S.-advised anticorruption group, the Major Crimes Task Force. He ordered a handpicked commission to review scores of past and current anticorruption inquests. Senior U.S. military and civilian officials with direct knowledge of the events regard Mr. Karzai's move as an effort to protect those close to him and, in the process, to quash the investigation into New Ansari.”
Mr. Rosenberg reported that “Afghan customs documents reviewed by the Journal indicate that $3.18 billion of cash was flown out of the country between the start of 2007 and February 2010. Couriers identified by U.S. and Afghan officials as working for New Ansari carried $2.78 billion of it, according to the documents. One New Ansari courier, identified by the documents only as Rahmatullah, personally carried at least $2.3 billion out of the Kabul airport between the start of 2008 and the middle of 2009, much of it to the United Arab Emirates financial center of Dubai, a senior U.S. official said. New Ansari's manager, Haji Muhammad Khan, said in a recent interview the company did nothing wrong. The money being flown out of the country was declared, so moving it was legal.”
ETHICS OF LOBBYING - MORE TROUBLE FOR BP AS ITS LIBYAN CONNECTIONS REVEALED
The New York Times
reported July 15, 2010, that BP has publicly confirmed that it lobbied the UK Government of then Prime Minister Gordon Brown for the release of Abdel Basset Ali al-Megrahi, who was in prison in Scotland for the 1988 Lockerbie plane bomombing that killed 270 people. The Government released the prisoner and sent him back to Libya last year claiming his acute illness gave him just 3 months to live - he is still alive today. Meanwhile, BP's efforts related to its negotiations with the Government of Libya over a $900 million offshore oil
and gas exploration and development deal. The US Senate is investigating.
Thurgood Marshall Jr.,
son of legendary US Supreme Court Justice and a former White House legal advisder joins the Board of Directors of the US Ethics Resource Center.
Marshall is a partner in the Washington, D.C. office of Bingham McCutchen LLP.served as assistant to the President and Cabinet secretary to President Clinton from 1997 to 2001. Earlier in the Administration, he was director of legislative affairs and deputy counsel to Vice President Gore.
....Viewpoint from Frank C. Bucaro
"Is Trust Taking a Hit?" asks this US ethics commentator.
He suggests: “Is it just me, or is trust “taking a hit” lately? How about the lead story of the past several weeks; Do you feel the information released has been 100% accurate on the situation in the Gulf of Mexico? How about politics? Do you feel totally confident about the accuracy of information circulated by political candidates? What about consumer products? Do you ever question the safety or effectiveness of a product, even if backed by a big name brand? How about your healthcare provider? Ever questioned a diagnosis or treatment plan?”
Bucaro draws attention to the need to “Pay attention to your Moral Compass!”
Find the full article at his website.
And talking about trust.....
,Executvie Producer of Lighthouse Productions
, has made a thought-provoking documentary on business ethics. Key questions about the need to build trust in American corporations are put by University of Pennsylvania, Wharton Schoiol ethics Professor Tom Donaldson to an array of experts. The most facinating interview involves Aaron Beam, the former finance director of Health South, who went to prison for cooking the books.
The TV program, shown earlier this year on US public television (learn more - click here
) asserts that. "Every day in corporations around the world, careers, capital and time-honored brands that may have taken decades to build are put at risk. Because – as a never-ending stream of news stories keeps proving – corporate ethics scandals can sweep them away in the blink of a news cycle."
While the experts agree on the range of risks involved and the critical importance of good corporate ethics, the film provided few practical and fresh answers. Nor did it raise the key issue of the huge gap in the US between top compensation and average pay, which for many workers is seen as an ethical issue. Nor, did it bore down into the key finding of many Ethics Resource Center surveys that the CEO must provide, every minute of the day, model ethical leadership.
Key point -- more documentaries of this kind are needed to take business ethics from the sidelines into the mainstream.
Group of 20 Summit Declaration Features Anti-Corruption...June 27, 2010 - extract - "We agree that corruption threatens the integrity of markets, undermines fair competition, distorts resource allocation, destroys public trust and undermines the rule of law. We call for the ratification and full implementation by all G-20 members of the United Nations Convention against Corruption (UNCAC) and encourage others to do the same. We will fully implement the reviews in accordance with the provisions of UNCAC. Building on the progress made since Pittsburgh to address corruption, we agree to establish a Working Group to make comprehensive recommendations for consideration by Leaders in Korea on how the G-20 could continue to make practical and valuable contributions to international efforts to combat corruption and lead by example, in key areas that include, but are not limited to, adopting and enforcing strong and effective anti-bribery rules, fighting corruption in the public and private sectors, preventing access of corrupt persons to global financial systems, cooperation in visa denial, extradition and asset recovery, and protecting whistleblowers who stand-up against corruption."
South African police chief found guilty of corruption. Jacob Sello Selebi, seen to have been involved with organized crime, could face 15 years in prison. His trial, reported the BBC, “has been described as one of the defining trials of post-apartheid South Africa.” He was appointed to head the police force after having served as South Africa's permanent representative at the United Nations in Geneva for three years and then as director general in the Department of Foreign Affairs. July 2, 2010.
The 1984 Bhopal calamity
Mindful of the Gulf of Mexico oil disaster it is enlightening to recall the greatest of all corporate humanitarian tragedies. Article by S. Viswanathan the Hindu, India - excerpt
With a former Chairman of Union Carbide India Limited, Keshub Mahindra, and seven others convicted and sentenced to two years imprisonment by a trial court, the 26-year-old Bhopal tragedy case has reached a new stage.
The long wait for the families of thousands of victims who were either killed or seriously injured by toxic gas that leaked from the Union Carbide's chemical pesticide plant has not brought justice to these people, most of who are poor. This is a heart-rending case of justice delayed, justice denied. The subject therefore is back in the arena of public discussion.
Moves are on to take the issue to higher courts, either in India or the United States or both. Meanwhile questions are being raised and discussed over the whereabouts of Union Carbide Chairman Warren Anderson, the principal accused in the case and a proclaimed absconder. A hot question raised is who facilitated the escape of Anderson who visited Bhopal a couple of days after the disaster after being assured of “safe passage.” He was arrested along with a few other executives of Union Carbide but freed and allowed to return to the United States.
The main issue
The key issue, as it often happens, is being sidetracked: it is the accountability and culpability of those in Bhopal and New Delhi who made the critical decisions preceding and following the calamity....
Afghan Women: Artfully Unforgotten By Heather Metcalfe
Excerpt from Policy Innovations June 10, 2010
Photo: Heather Metcalfe © 2009.
Rabia Balkhi wrote her last poem on the bathroom wall with her blood while dying. She had fallen in love with a servant and her brother ordered her killed. Rabia died a violent and unjust death, but the people of Afghanistan now remember her as a hero.
In June 2009, I asked men and women in Afghanistan about heroines. Rabia's name was always mentioned. She was a famous poet who had challenged the cultural norms by falling in love with her brother's servant. Her brother's honor was therefore ruined and he ordered her dead. Nobody could tell me what poem she wrote on the wall, but that was not the point. The point is she refused to give up and die a victim. She defied her brother by having the last word.
Rabia was a strong woman who refused to be silenced, and women and men alike visit her grave in honor. While in Mazar-i-Sharif where I learned of Rabia's story, I decided hers was a story that needed to be told, together with the stories of the women of Afghanistan.
Storytelling is what I do. Throughout my life I have told stories by acting in the theatre. I transitioned into telling the stories of battered women and children while serving as a legal advocate, and I went to law school to expand my ability to present those stories in court. Yet I found myself drawn to advocating through art rather than in the courtroom. Instead of jumping into the practice of law, I founded Artfully Unforgotten, a nonprofit where artists raise awareness and resources for vulnerable communities through telling stories that don't often get heard, such as Rabia's.
Today there are women like Rabia Balkhi all over Afghanistan. These women refuse to give up and be victims, even though they experience severe oppression. I realized when hearing their stories that it serves no one to think of Afghan women as merely victims, because they are the last ones to see themselves as such. Nor does it help the cause for women's empowerment worldwide. Thus, the NGOs and media working in Afghanistan should tell these stories of strength and accomplishment among Afghan women.
Ferishta is one such woman, the founder of a soccer ball manufacturing company. Ferishta said, "The women of Afghanistan are strong. All the men in the world would not be able to bear the pain that they have endured." Ferishta fled to Pakistan during Taliban rule. She returned to Afghanistan upon the fall of the Taliban with nothing in hand and no home. She got a job with the UN, married a childhood friend, and started her own company. It never crossed her mind to merely be a victim.
The article concludes...According to UN Resolution 1325 [PDF], women are to be included in the rebuilding of society, especially post-conflict. If women are constantly viewed as victims, then the resources women have to offer are likely to be overlooked. If NGOs and donor governments want to further the cause of Afghan women, then more stories of their accomplishments need to be told. Not only will these stories encourage a belief in their ability to rebuild Afghanistan, but they will also inspire hope in women worldwide.
Congratulations -- ProPublica Wins America's Top Journalism Prize -- Pullitzer Award Goes to Investigative Reporting on Katrina - New Orleans Health Mystery
ProPublica, established with philanthropic funds to pursue investigative journalism on the web into critical social and political issues of our time, is the first web-based Pullitzer journalism winner.
“The conduct would make Lincoln roll over in his grave." --- US Federal prosecutor Patrick Fitzgerald describing the mass of alleged corruption schemes involving former Illinois Governor Rod Blagojevich.
June 2 -- The Blagojevich trial has started in Chicago. It highlights both the outrageous kinds of abuse of public office for personal gain that involve powerful politicians, as well as the strength of independence and integrity of the legal system. For all the corruption that exists in US politics – and it is extensive – the counterweight time and again is the independence and authority of the police, the public prosecutors and the judiciary.
Among the 24 counts of fraud, bribery, extortion, racketeering, conspiracy and other political corruption charges brought against the former Governor and his brother, Robert Blagojevich, none has been seen as more sensational than the effort to sell a U.S. Senate seat. When Barack Obama was elected President he vacated his Senate seat and it fell to the Illinois Governor to select a successor. It is alleged that a covert extortion game was attempted, where the brothers Blagojevich suggested (in telephone conversations taped by the FBI) that the person selected would need to find ways to compensate the brothers in return.
Indeed, President Abraham Lincoln, who grew up in Illinois politics, may well, as Fitzgerald said, “turn in his grave.”
Setting the court scene in Chicago, US National Public Radio recalled in its report that in late December 2008 Blagojevich told reporters, "If anyone wants to tape my conversations, go right ahead; feel free to do it." Little did he know that the FBI was doing just that and the evidence to be brought to court includes 500 hours of the Governor’s chat.
NPR reported that Federal wiretaps approved in late October of 2008 recorded Blagojevich allegedly scheming to sell the Senate seat to the highest bidder.
The tapes allegedly expose schemes involving not just the Senate seat, but also attempts to extort big campaign contributions from a highway contractor, the owner of a horse racing track and an executive of a children's hospital.
The federal wiretaps only recorded Blagojevich's conversations less than two months before he was arrested. The indictment alleges corrupt activity dating back six years. Three former top aides have pleaded guilty and will testify against the Governor.
"This was allegedly paid to play on ultra steroids, says Andy Shaw, executive director of the Better Government Association.”Everything was for sale, this was government for sale….If the government's case is true, this was the most cynical, hypocritical, disingenuous, approach to government in the history of Illinois and maybe most other states."
I have support of Vatican, says cardinal accused of corruption
Reuters reported on June 22, 2010 that an italian cardinal, caught up in a vast corruption probe that has already tainted the government, said he had done nothing wrong and had the support of the Vatican.
"I did everything with the utmost transparency," said Cardinal Cresenzio Sepe, the archbishop of Naples, who is under investigation by Italian magistrates for questionable real estate transactions when he was a top Vatican official in 2005.
Sepe, 67, is being investigated for alleged corruption when he was running the Congregation for the Evangelisation of Peoples, a cash-and-real-estate-rich department of the Vatican that finances the work of missions abroad.
BP's Fund - The Ethical Response To Unprecedented Political Pressures?
The massive US Gulf of Mexico oil spill created an unprecedented agreement by BP, the major company widely seen to be responsible for the initial accident. BP chief executive, Tony Hayward told Congress on June 17 that he was “deeply sorry” for the disaster and that, after a White House meeting, the company is set to establish a $20 billion fund to pay damage claims to thousands of fishermen and others along the Gulf Coast. BP also said it would suspend dividend payments to shareholders. Who will be able to obtain compensation form the fund will pose major practical, legal and ethical challenges for Kenneth Feinberg, who the White House has apppointed as the independent administrator of the fund - he ran the fund for victims of the Sept. 11 attacks.
Common Purpose: Joel Kurtzman
How Great Leaders Get Organizations to Achieve the Extraordinary
The Milken Institute's Joel Kurtzman tackles the central question of leadership: What is common purpose? It is that rare, almost palpable experience that happens when a leader coalesces a group, team or community into a creative, dynamic, brave and nearly invincible we. It happens the moment the organization's values, tools, objectives and hopes are internalized in a way that enables people to work tirelessly toward a goal. Common purpose is rarely achieved.
United Kingdom Passes New Corruption Legislation
The past failures of the UK Government to prosecute companies that bribed foreign officials, and the blunt rebukes that showered down on the UK, including from the OECD, prompted the drafting of a new law. On the eve of the dissolution of the UK Parliament following the announcement of national elections, the Houses of Parliament voted for the new law.
Transparency International-UK says this represents an effort "to restore Britain's reputation."
On April 8, 2010 Chandrashekhar Krishnan, Executive Director of Transparency International UK said: “We congratulate the Government for fulfilling its commitment to modernise UK bribery law in this Parliament and applaud the all-party consensus that has made this legislation possible. For twelve long years Transparency International UK has been calling for modern, effective anti-bribery legislation. The new Bribery Act is fit for purpose and will ensure the UK is compliant with the OECD Anti-Bribery Convention. It will also give UK law enforcement a sound legal framework to prosecute offenders.
This Act sends out a strong message to UK plc and the rest of world – the UK will not tolerate bribery. Ethical practices must be firmly embedded in all echelons of business. The era of ‘business as usual’ is over.
“Corruption disproportionately affects the poor and is a persistent threat to development and democracy. The UK will now have greater credibility in encouraging good governance in countries that receive UK aid and in persuading major emerging economies to stop their own companies paying bribes”.
Transparency International UK congratulates all the major political parties for their resolve to pass this historic and long overdue legislation. One further step remains to be taken - the bribery offences in the Act will only come into effect after the Government issues guidance on adequate procedures for companies to prevent bribery. Transparency International UK urges the incoming government after the general election to ensure that the guidance is issued in sufficient time that the offences will take effect in October 2010.
THE COSTS OF THE FINANCIAL CRISIS AS SCANDAL DETAILS ARE REVEALED
- 3 NEW STORIES
- ICELAND - A 2,300 investigative report by a special commission has found "gross negligence" on the part of key government pofficials that resulted in the gravest financial and economic crisis in Iceland's history. The Wall Street Journal reported of April 13, 2010, that during October 2008, all three of Iceland's big banks—essentially the entire banking system—melted down within days. "The private banks failed, the supervisory system failed, the politics failed, the administration failed, the media failed, and the ideology of an unregulated free market utterly failed," Prime Minister Johanna Sigurdardottir said in a statement after the report was released. The investigation pointed a finger at seven top officials including then-Prime Minister Geir Haarde.
- LEHMAN BROTHERS - The New York Times lead story on April 13 on page one highlighted an investighation into the collapse of former Wall Street giant bank Lehman Brothers, which showed that it had hidden risky assets and a host of activities from shareholders and investors alike through what it called a small "alter ego" company.
- WASHINGTON MUTUAL - one of the casuses of the largest commercial bank collapse in US history in 2008 was fraud, according to an 18 month investigation into Washington Mutual by a U.S. Congressional team. "Using a pay policy that rewarded employees for originating loans regardless of their quality, Washington Mutual flooded the market with shoddy loans that went bad,” Senator Carl Levin said, as reported by Bloomberg bon April 13, 2010. He added, “It built a conveyor belt to dump toxic mortgage assets into the financial system like a polluter dumping toxic substances into the river.”
More Bad News on Giant Corporations -
reported that Germany’s Daimler AG
allegedly earned $1.9 billion in sales and at least $91.4 million in illegal profits from transactions tainted by bribes, according to the U.S. Securities and Exchange Commission. There were more than 200 transactions in which it made at least $56 million in improper payments to foreign officials, the SEC said. Daimler issued a statement on April 1, which you can find in full ...see Investigations & Prosecutions
The Times (London)
, meanwhile, reported that the UK Serious Fraud Office has carried a series of searches in connection with suspected corruption by Alstom
, the French transport and infrastructure group. The SFO said it was investigating suspected bribes paid by Alstom's UK subsidiaries in order to win contracts in foreign markets.
More Extortion in Congo -.Global Witness in an investigative report says that in the eastern Democratic Republic of Congo (DRC) former rebels have established mafia-style extortion rackets covering some of the most lucrative tin and tantalum mining areas. Global Witness campaigner Annie Dunnebacke stressed, “For more than a decade now, the country’s mineral wealth has provided an incentive and a cash base for the conflict to continue. Unless the government and international donors implement a comprehensive strategy which tackles once and for all the economic drivers of this conflict, the local population will continue to suffer and the country’s future will continue to be blighted.”
India Sets Key Corporate Governance Mandate for Public Enterprises. The Business Standard
reported that the government announced that central public sector enterprises will have to mandatorily follow corporate governance norms, which was introduced on a voluntary basis in 2007. The guidelines cover issues like composition of boards of CPSEs, audit committees, subsidiary companies, disclosures, code of conduct and ethics, risk management and reporting, the statement said.
RIO TINTO EXEC GETS 10 Years In China - The Verdict: Australian & RIO Responses
(April 9, 2010 - The Wall Street Journal reported that executvie Stern Hu, an Australian national, will not appeal his 10 year sentence.)
March 30, 2010 - VERDICT -- The China Daily reported form Shanghai that a Chinese court sentenced four employees of the UK-Australian mining company, Rio Tinto, to jail terms of seven to 14 years on bribery and commercial secrets charges. The court found Australian national Stern Hu and three Chinese co-workers guilty of all charges. It sentenced Hu to 10 years on bribery and stealing commercial secrets charges and gave him a fine of 1 million yuan.The longest term of 14 years was given to Wang Yong, of which 13 years was for accepting bribes. He was also given a fine of 5.2 million yuan. Media reports last week said Wang was accused of receiving $9 million from a Chinese steel tycoon Du Shuanghua, who hoped to set his own agreements with overseas ore suppliers. The judge told the court that the case had caused "severe" losses to China's steel-making industry and had hurt the interests of the country.
AUSTRALIAN REACTION - Australia’s Foreign Minister, Stephen Smith, has described the shock 10-year jail term handed to the Australian businessman as ''on any measure a very tough sentence'' which put at risk the confidence the international business community needs to operate in China, according to the Sydney Morning Herald. Mr Smith said the verdict left ''serious unanswered questions'' for both the Australian and international business communities over the handling of the charge of stealing commercial secrets.
RIO RESPONDS - The Australian reported that RIO Tinto has ordered a fresh independent review of its processes and controls following the hefty sentences handed out to executive Stern Hu and three of his colleagues yesterday.
Rio last night insisted the illegal activities of the employees were conducted "wholly outside its systems" while admitting the evidence in court had showed beyond doubt the four employees had accepted bribes. Rio Tinto Iron Ore chief executive Sam Walsh said: "Receiving bribes is a clear violation of Chinese law and Rio Tinto's code of conduct, The Way We Work. "We have been informed of the clear evidence presented in court that showed beyond doubt that the four convicted employees had accepted bribes. “By doing this they engaged in deplorable behavior that is totally at odds with our strong ethical culture. "In accordance with our policies we will terminate their employment."
GOOGLE QUITS CHINA
When should business leave on human rights grounds? - Aron Cramer and Dunstan Allison Hope of Business for Social Responsibility Provide the Answer.
With Google’s decision today to shut down its Chinese-based search engine, google.cn, the company has won considerable praise from organizations concerned about its human rights record. This approval stands in stark contrast to the condemnation the company received when first entering the country in 2006. The Financial Times cartoonist Ingram Pinn captured these contrasting perspectives perfectly, depicting Google as the speech-suppressing “Great Firewall of China” in 2006, then casting the company as the lone protestor stopping the tanks in their tracks in 2010.
Google’s decision again raises a question of serious interest to business, the public, and governments: When is it right to cut ties and leave a country on human rights grounds?
Leaving often seems like the clear-cut ethical winner in this debate. There often is, however, a case for companies to stay, provided there is a commitment to making a positive impact on human rights. Leaving may look and feel great to those of us in the West, but exiting a market may not always have the desired impact.
Consider the case of the consumer electronics companies. They are increasingly under fire about whether the metals they source from the Democratic Republic of Congo (DRC)—tin, tantalum, and tungsten—may be helping fund the purchase of weapons that fuel violence and human rights abuses in one of the world’s toughest conflict zones. There is a consensus that “conflict minerals” should be eliminated from the electronics industry, and the tempting next step is to cut out all minerals sourced from the DRC.
But that decision isn’t as simple as it may seem: Because end buyers purchase from refiners that often combine ore from multiple sources, traceability remains a problem, and it might not even be practical to “leave” the country.
By contrast, what if companies were to leverage their purchasing power to drive positive change in the DRC? Perhaps there is a role for business to bring “development-oriented metals” to market by identifying specific mines where the benefits of mining are shared locally and production upholds human rights. As an alternative to leaving, companies could also explore diplomatic channels to encourage a sustainable trade in minerals in the DRC and the surrounding region.
GE is taking a related approach in China and Vietnam, where the issues are very different than those in the DRC. Among the company’s top corporate responsibility priorities is “rule of law.” GE’s leadership believes that effective government in emerging markets is critical for both business success and human rights, and the company therefore works with government and civil society to establish transparent legal systems, encourage open law-drafting processes, and develop well-trained judges and lawyers. For example, GE attorneys teach classes at law schools in both countries, and the company’s foundation also invests in rule-of-law initiatives by providing grants such as one in China to an organization focused on commercial law, intellectual property rights protection, and citizens’ rights, and another in Vietnam to a program that aims to strengthen courts and enhance legal transparency.
One might conclude that the comparisons between countries don’t work, because all situations are different. In fact, that is exactly the point: When it comes to determining whether a company’s decision to enter or exit a market is good or bad for human rights, there’s no one-size-fits-all rule, and the ethics of the decision will vary considerably with the context.
As such, “are you in or are you out” may be the wrong question. No company automatically advances human rights by leaving a country, and, likewise, no company automatically improves the situation by staying. In all but the worst cases, it’s how business participates in challenging markets that is the ultimate test. Does the company have a clear understanding of how its products, services, and market presence will impact human rights? Has the company identified its most significant human rights risks, and does it understand how to mitigate them? Is it working with sympathetic government partners to advance human rights?
Let’s also remember the opinions of the people these decisions are designed to support: the local population. Many companies leave certain countries because democratically legitimized local movements called for mass divestments, which is not the case in China today.
BROWSE THE ARCHIVE...
Corporate Governance as Warren Buffet Sees It
From the February 27, 2010 Letter to Shareholders of Berkshire Hathaway by Chairman and CEO Warren Buffet:
In my view a board of directors of a huge financial institution is derelict if it does not insist that its CEO bear full responsibility for risk control. If he’s incapable of handling that job, he should look for other employment. And if he fails at it – with the government thereupon required to step in with funds or guarantees – the financial consequences for him and his board should be severe.
It has not been shareholders who have botched the operations of some of our country’s largest financial institutions. Yet they have borne the burden, with 90% or more of the value of their holdings wiped out in most cases of failure. Collectively, they have lost more than $500 billion in just the four largest financial fiascos of the last two years. To say these owners have been “bailed-out” is to make a mockery of the term.
The CEOs and directors of the failed companies, however, have largely gone unscathed. Their fortunes may have been diminished by the disasters they oversaw, but they still live in grand style. It is the behavior of these CEOs and directors that needs to be changed: If their institutions and the country are harmed by their recklessness, they should pay a heavy price – one not reimbursable by the companies they’ve damaged nor by insurance. CEOs and, in many cases, directors have long benefitted from oversized financial carrots; some meaningful sticks now need to be part of their employment picture as well.
The recall TOYOTA Mr.
Toyoda explains to US Congress, February 24, 2010...
I am Akio Toyoda of Toyota Motor Corporation. I would first like to state that I love cars as
much as anyone, and I love Toyota as much as anyone. I take the utmost pleasure in offering
vehicles that our customers love, and I know that Toyota’s 200,000 team members, dealers, and
suppliers across America feel the same way. However, in the past few months, our customers
have started to feel uncertain about the safety of Toyota’s vehicles, and I take full responsibility
...My name is on every car. You have my personal commitment that Toyota will work vigorously and unceasingly to restore the trust of our customers. See full company statement.
Corruption in municipal governments is extensive and in a new study scholars in Chicago take an in-depth look at their city and its suburban history of graft - a record of 170 convictions - COOK COUNTY’S "HALL OF SHAME"
A CATALOG OF CORRUPTION
By: Thomas J. Gradel, Dick Simpson and Tom Kelly, with Andris Zimelis, Kenneth Chow, Alexandra Kathryn Curatolo, Emily Gillot, David Michelberger, Marrell Stewart of the University of Illinois at Chicago, Department of Political Science and the Better Government Association
From the Introduction...Cook County government has been a dark pool of political corruption for more than 140 years. The first public corruption scandal occurred in 1869 when a number of Cook County Commissioners accepted bribes to approve a fraudulent contract to paint city hall. During the last several decades, Cook County has been a center of corruption with scandals emerging in many different units of county government. By chronicling the cases we hope to call attention to the need for meaningful reform.
When county government such as Cook County Clerk David Orr’s office or Assessor James Houlihan’s office do undertake meaningful reform, others sink back into the mire. Public or political corruption occurs when government officials use their public office for private gain or benefit. In Cook County government this includes outright bribes as well as campaign contributions made by individuals or corporations in exchange for jobs, inflated contracts or political favors. It includes ghost payroll jobs in which individuals get a paycheck but do no work.
With an annual budget of more than $3billion — dishonest public servants find many different ways to profit illegally.The purpose of this report is to summarize the many different forms of corruption and to recommend basic reforms that need to be enacted to clean up Cook County government.
This report provides a roster of nearly 150 convicted Cook County politicians and government officials along with descriptions of each of their illegal schemes. It includes private citizens and businessmen who were also convicted in connection with public corruption scandals. There are eight individuals named who are under investigation or have been indicted but not yet convicted. Criminal convictions are just the tip of the iceberg in Cook County. For each corrupt official who is convicted—there may be dozens more who are involved in the same or similar schemes but escape prosecution. The pattern of political corruption in county government is widespread and not confined to a single unit of government. An especially egregious example was Judge Thomas J. Maloney. He was convicted in Operation Greylord of accepting thousands of dollars in bribes to fix felony cases including murder trials. Another outrageous example was Marie D’Amico convicted in Operation Haunted Hall of having three no-work jobs. D’Amico is the daughter of Alderman Tony Laurino and wife of then Deputy Commissioner of Chicago’s Department of Streets and Sanitation John D’Amico, who did 2 years in federal prison for his involvement in the ghost payroll scheme.
Finally, in addition to systemic corruption, county government is infested with conflicts of interest that often result in contracts being awarded to the friends, family and political cronies of public officials. See the full report
Feb 16, 2010 – Kenyan Prime Minister Raila Odinga has accused President Mwai Kibaki of overstepping his powers, in an increasingly bitter row over corruption allegations. The BBC reported that Mr Odinga suspended the ministers of education and agriculture on allegations of embezzlement only for President Mwai Kibaki to reverse his decision. The US ambassador, Michael Ranneberger, has called on both leaders to work together to tackle corruption. "My government feels very strongly that this is a time for dialogue in the interest of the nation, not a time for finger-pointing or mutual recrimination," he said. Mr. Odinga has called on former UN Secretary-General Annan to mediate, while his cabinet allies have threatened to boycott cabinet meetings, according to the BBC. A recent audit into a maize scandal revealed that $26m (£16.5m) had been diverted while more than $1m was stolen in an education scam.
February 5, 2010 -- Fines of $450 million for BAE Systems - Europe's biggest military contractor, will pay around $450 million in fines in the United States and Britain and admit to wrongdoing in Saudi Arabia, the Czech Republic, Hungary and Tanzania. Announcements by the UK's Serious Fraud office and the US Department of Justice underscored patterns of false statements to officials, secret offshore bank accounts and unrecorded payments to various agents by BAE Systems. Chandrashekhar Krishnan, Executive Director of Transparency International UK said the conclusion of the BAE cases, "Highlight the need for a new Bribery Act in the UK. For a Bribery Act to be successful, sufficient resources for effective enforcement will be crucial in order to deliver faster prosecutions and encourage companies guilty of corrupt practices to admit their guilt and not spend years blocking investigations.”_________________
UPDATE: BAE Court Appeal Rejected (see main stories below)
The two groups are taking legal advice on whether or not to appeal the decision.Application for judicial review of Serious Fraud Office's BAE settlement turned down The Corner House and the Campaign Against Arms Trade (CAAT) have their BAE appeal refused (initial stories below) and stated, "The Honourable Mr Justice Collins today announced his decision to refuse to grant permission to Campaign Against Arms Trade (CAAT) and The Corner House to bring a full judicial review hearing against the decision by the UK Serious Fraud Office (SFO) to make a controversial plea bargain settlement with BAE Systems. (24 March 2010)
UK Serious Fraud Office (SFO) Challenged Over BAE System’s Settlement. London, UK, February 12, 2010. Challenge brought by The Corner House and the Campaign Against Arms Trade (CAAT). The challenge highlights the very different approaches to foreign corrupt payments’ cases in the UK and the US.
Lawyers acting for the two organizations have sent a detailed letter laying out their intention to request a judicial review of the 5 February 2010 decision by the SFO to enter a plea agreement, which involved a fine of £30 million arising from one aspect of a case involving Tanzania – directly after the UK announcement, the U.S. Department of Justice announced an agreement with BAE involving a fine of $400 million with regard to alleged bribery payments by the firm on contracts for Saudi Arabia, Tanzania, Czech Republic and Hungary.
The UK organizations asserted that the SFO agreement agreement fails to reflect the seriousness and extent of BAE's alleged offenses. Nicholas Hildyard, for The Corner House, said: "Plea bargains should only ever be entertained when companies have really come clean. BAE has not. Once again, an SFO decision has reinforced the UK's reputation for letting big companies get away with bribing. Once again, it has shown a blatant disregard for the rule of law." Kaye Stearman, CAAT's spokesperson, added: "The SFO plea bargain is unlawful. Investigations into alleged corruption in at least three countries have simply been dropped. It is in the public interest that BAE should not be let off the hook."
The groups' lawyers also requested that the Serious Fraud Office delay applying for court approval of its settlement with BAE Systems. If it does not do so, the two groups will seek an injunction against the court application. Background: In December 2006 the SFO dropped its bribery and corruption investigations into BAE's arms sales to Saudi Arabia, following pressure from BAE and Saudi Arabia and a direct intervention from then Prime Minister Tony Blair. The decision was subject to severe criticism and prompted CAAT and The Corner House to launch a judicial review of the decision.
In April 2008, the High Court ruled that the SFO Director had acted unlawfully by stopping the investigation; a decision subsequently overturned by the House of Lords in July 2008, which ruled that he acted lawfully when faced with a threat to national security. On 1 October 2009 the SFO began drawing up legal papers to recommend prosecution of BAE, following its six-year investigation into alleged bribery in BAE arms deals with several other countries (Chile, Czech Republic, Qatar, Romania, South Africa and Tanzania). BAE is alleged to have paid bribes, often in the form of commissions to "advisers" to clinch the deals. Under the SFO settlement announced on 5 February 2010, BAE would plead guilty to minor charges of "accounting irregularities" in its 1999 sale of a radar system to Tanzania for which the SFO proposed it should pay penalties of £30 million. The SFO would not bring charges relating to alleged bribery and corruption in BAE's arms deals elsewhere. Additional information at CAAT.
February 4, 2010 ---First Major Banking Crisis Charges
New York Attorney General Acts Against Bank of America and Its Former Top Two Officers
Just as Bank of America settled a case against it from the U.S. Securities and Exchange Commission with a fine of $150 million related to the adequacy of information it provided to shareholders on acquiring Merrill Lynch, the New York Attorney General, Andrew Cuomo, has brought a major civil action. He has charged the bank, together with its former Chairman and Chief Executive Officer Kenneth Lewis and its former Chief Financial Officer Joe Price. This is the first case brought against one of the most powerful global bankers who played critical roles in the last few months of 2008 as the world's financial system appeared on the brink of collapse.
In mid-September 2008, as Lehman Brothers was about to fail, Mr. Lewis agreed that Bank of America should acquire the giant brokerage firm of Merrill Lynch. The deal was finalized at the start of 2009, by which time it was evident that Merrill's losses were far greater than had previously been publicly known, that it was unclear how much information the bank had given the US Government in obtaining a $20 billion "bail-out" to push through its acquisition, and whether shareholders were dealt with honestly. These are the issues, strongly contested by Lewis and Price and the Bank, that Cuomo will now take to court. See The New York Times as well as its “DealBook” report for details and links.
January 28, 2010 from TI Chair Huguette Labelle
An Open Letter from Transparency International to the Participants of the London Conference on Afghanistan
Dear Honourable Leaders,
Widespread corruption in Afghanistan continues to seriously undermine state-building and threatens to destroy the trust of the Afghan people in their government and their institutions while fuelling insecurity. As the international community emphasises the need to counter corruption, the Afghan people agree: their worry about the devastating effects of corruption rivals concerns about security and employment. Corruption impacts their daily lives, especially the poorest.
It is therefore urgent for all those working on bringing stability to Afghanistan to establish an anti-corruption strategy and a solid plan of action for its implementation, in cooperation with the Afghan leadership and citizens, which embeds transparency and accountability into all facets of public life.
Credibly and effectively addressing corruption is essential to re-build trust in the institutions of the state. It is positive that there are changes already underway, such as the recent appointment of Dr Ashraf Ghani, which promises to strengthen anti-corruption efforts within the Government of Afghanistan.
It is also encouraging that this conference is being held with a focus on improving governance in Afghanistan, arguably one the major challenges facing the country today. At the same time, the international community urgently needs to take a hard look at itself, the ways in which it contributes to the problem of corruption, and the real contributions it can make to future solutions to help strengthen all anti-corruption efforts and foster integrity, transparency and accountability in Afghan public institutions.
Increasing aid and military spending for development, reconstruction and peace will require an anti-corruption road-map agreed jointly with the Afghan people. This road-map must become a local priority with a strong focus on implementation. The success of any anti-corruption effort will depend on direct responsibility being assumed by the civilian, diplomatic and military communities. They must all become integral parts of solution efforts.
As such, future solutions will also depend on the effective integration of local and international efforts. For example, international reconstruction contracts should require transparency and local accountability, along with common frameworks to trace funding to Afghanistan from its origins to disbursement for local level projects to build new schools, roads and other vital services. The international community should also scale up its technical and financial support for anti-corruption work and training at all levels of the government, its ministries and the broader public sector.
There are many ways in which the international community can assist in creating a culture in the public sector that respects integrity, transparency and accountability. This includes scaling up training and support to full-time anti-corruption teams in each Ministry, increasing mentoring of senior officers and officials, provision of expertise in specific areas such as prosecution, and other vital areas.
Transparency International (TI), an anti-corruption movement with chapters in over 90 countries, calls on the political and military leaders at the London Conference, to work with champions of integrity both within and outside the Government of Afghanistan to create an Afghan-led diagnosis of corruption in the country. The international community can help to identify corruption challenges that require primarily an Afghan-led solution and those requiring joint efforts.
Afghanistan is perceived as one of the most corrupt countries in the world today, according to TI’s latest Corruption Perceptions Index. There is an urgent need for immediate action along with a sustained and comprehensive long-term plan and commitment; the scale of governance problems demands nothing less. Anything else may prove to be a cosmetic effort and ultimately will not benefit the Afghan people.
Supporting a credible, Afghan-run anti-corruption plan based on a collaborative Afghan-led diagnosis involves scaling up anti-corruption training and resources. It means developing transparent monitoring mechanisms for reconstruction projects, dealing effectively with corruption in public procurement, full transparency and accountability in revenues budgets and their disbursements both by the different levels of Afghan governments and by the international community providing assistance. It is also necessary to extend and support the good work done by local NGOs to stop aid mismanagement.
In addition, the police and judiciary must be fully functional and operate with integrity to regain the trust of the Afghan people.
This conference offers the chance to discuss and promote constructive and practical measures to push back the tide of corruption in Afghanistan. For real and lasting change we urge you to turn this opportunity into a long-term strategy backed up by commitment of the Afghan and international leadership.
Sincerely,Huguette Labelle, Chair, Transparency International
January, 2010 ---The Late Carol Marshall, an Admired Leader in Business Ethics, Is Named Recipient of ERC's 2009 Pace Award...See ERC
French President Nicholas Sarkozy Calls for Fundamental Reforms of Globalization and Capitalism - His Vision Looks to radically Change the Roles of Corporations and the State and Global Governance Arrangments
Speech on January 27, 2010 in Davos...see full text at World Economic Forum
We are all responsible for the crisis. And we are all responsible for the world we are going to leave to our children. Not to draw the conclusion that we must, therefore, change our ways would be, quite simply, irresponsible.
This crisis is not just a global crisis. It is not a crisis in globalization. This crisis is a crisis of globalization. It is our vision of the world which, at a given moment, revealed its failings. That is what we must correct.
Globalization first took the form of globalization of savings. It gave rise to a world in which everything was given to financial capital and almost nothing to labor, in which the entrepreneur gave way to the speculator, in which those who lived on unearned income left the workers far behind, in which the use of leverage, to an unreasonably disproportionate extent, created a form of capitalism in which taking risks with other people’s money was the norm, allowing quick and easy profits but all too often without creating either prosperity or jobs.
...We will never put an end to hunger, poverty and misery in the world if we do not succeed in stabilizing the prices of raw materials, which at present are completely erratic. That is not an issue only for the experts. It concerns us all.
...We will not save the future of our planet if we do not pay the true price of scarcity. That is not an issue only for the experts. It concerns us all. We will not reconcile our citizens to globalization and to capitalism, if we are not capable of offsetting market forces with counterbalances and corrective measures. That, too, concerns us all. By discarding all our responsibilities in the marketplace, we have created an economy which has ended up running counter to the values on which it was nominally based, and to its own objectives.
By over-mutualising ownership and risk, we have diluted responsibility. By placing free trade above all else we have weakened Democracy, because citizens expect from Democracy that it should protect them…
We can only save capitalism by rebuilding it, by restoring its moral dimension. I know that this expression will call forth many questions. What do we need, in the end, if it is not rules, principles, a governance that reflects shared values, a common morality?....
We cannot govern the world of the 21st century with the rules and principles of the 20th century. We cannot govern globalisation while relegating half of Humanity to the sidelines, without India, Africa or Latin America. We cannot look at the post-crisis world in the same way as the world before the crisis. Each of us must hold the conviction that the world of tomorrow cannot be the same as the world of yesterday. There are indecent behaviors that will no longer be tolerated by public opinion in any country in the world. There are excessive profits that will no longer be accepted because they are without common measure to the capacity to create wealth and jobs. There are remuneration packages that will no longer be tolerated because they bear no relationship to merit.
That those who create jobs and wealth may earn a lot of money is not shocking. But that those who contribute to destroying jobs and wealth also earn a lot of money is morally indefensible.
- January 19, 2010 United Nations releases report on corruption in Afghanistan
based on interviews with 7,600 people (a reliable sample) in 12 provincial capitals and more than 1,600 villages around Afghanistan. Overview by Antonio Maria Costa Executive Director United Nations Office on Drugs and Crime (UNODC).
Poverty and violence are usually portrayed as the biggest challenges confronting Afghanistan. But ask the Afghans them-selves, and you get a different answer: corruption is their biggest worry. As revealed in this new UNODC report, for an over- whelming 59% of the population the daily experience of public dishonesty is a bigger concern than insecurity (54%) and unemployment (52%).
According to this report, it is almost impossible to obtain a public service in Afghanistan without greasing a palm: bribing authorities is part of everyday life. During the past 12 months, one Afghan out of two, in both rural and urban communities, had to pay at least one kickback to a public offcial. This was not just done through a wink and a nudge: more than half of the time (56%), the request for illicit payment was explicit by the service providers. In most instances (3/4 of the cases), baksheesh (bribes) are paid in cash. The average amount was $160 – in a country where GDP per capita is a mere $425 per year. This is a crippling tax on people who are already among the world’s poorest. cumstances the social contract is torn apart: loyalty is lost and discontent can erupt into violence.
The problem is enormous by any standards. In the aggregate, Afghans paid out $2.5 billion in bribes over the past 12 months – that’s equivalent to almost one quarter (23%) of Afghanistan’s GDP. By coincidence, this is similar to the revenue accrued by the opium trade in 2009 (which we have estimated separately at $2.8 billion). In other words, and this is shocking, drugs and bribes are the two largest income gen- erators in Afghanistan: together they amount to about half the country’s (licit) GDP.
Members of the government (much more than those sitting in Parliament) are perceived as villains. Corruption in their ranks was rampant last year: Afghans were asked to pay a bribe 40 percent of the times that they had contacts with senior politicians. A political system operating under such corrupt conditions cannot survive.
This survey did not address the question of possible foreign involvement in fomenting corruption in Afghanistan. Yet it makes a stunning observation: over half of the Afghans (54%) believe that international organizations and NGOs, the transmission belts of foreign assistance, “are corrupt and are in the country just to get rich”. (Read the full report at UNODC)
January 13, 2010 --
FREEDOM OF SPEECH - PROTECTING HUMAN RIGHTS ACTIVISTS IN CHINA
full GOOGLE statement
A new approach to China
Like many other well-known organizations, we face cyber attacks of varying degrees on a regular basis. In mid-December, we detected a highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property from Google. However, it soon became clear that what at first appeared to be solely a security incident--albeit a significant one--was something quite different.
First, this attack was not just on Google. As part of our investigation we have discovered that at least twenty other large companies from a wide range of businesses--including the Internet, finance, technology, media and chemical sectors--have been similarly targeted. We are currently in the process of notifying those companies, and we are also working with the relevant U.S. authorities.
Second, we have evidence to suggest that a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists. Based on our investigation to date we believe their attack did not achieve that objective. Only two Gmail accounts appear to have been accessed, and that activity was limited to account information (such as the date the account was created) and subject line, rather than the content of emails themselves.
Third, as part of this investigation but independent of the attack on Google, we have discovered that the accounts of dozens of U.S.-, China- and Europe-based Gmail users who are advocates of human rights in China appear to have been routinely accessed by third parties. These accounts have not been accessed through any security breach at Google, but most likely via phishing scams or malware placed on the users' computers.
We have already used information gained from this attack to make infrastructure and architectural improvements that enhance security for Google and for our users. In terms of individual users, we would advise people to deploy reputable anti-virus and anti-spyware programs on their computers, to install patches for their operating systems and to update their web browsers. Always be cautious when clicking on links appearing in instant messages and emails, or when asked to share personal information like passwords online. You can read more here about our cyber-security recommendations. People wanting to learn more about these kinds of attacks can read this Report to Congress (PDF) by the U.S.-China Economic and Security Review Commission (see p. 163-), as well as a related analysis (PDF) prepared for the Commission, Nart Villeneuve's blog and this presentation on the GhostNet spying incident.
We have taken the unusual step of sharing information about these attacks with a broad audience not just because of the security and human rights implications of what we have unearthed, but also because this information goes to the heart of a much bigger global debate about freedom of speech. In the last two decades, China's economic reform programs and its citizens' entrepreneurial flair have lifted hundreds of millions of Chinese people out of poverty. Indeed, this great nation is at the heart of much economic progress and development in the world today.
We launched Google.cn in January 2006 in the belief that the benefits of increased access to information for people in China and a more open Internet outweighed our discomfort in agreeing to censor some results. At the time we made clear that "we will carefully monitor conditions in China, including new laws and other restrictions on our services. If we determine that we are unable to achieve the objectives outlined we will not hesitate to reconsider our approach to China."
These attacks and the surveillance they have uncovered--combined with the attempts over the past year to further limit free speech on the web--have led us to conclude that we should review the feasibility of our business operations in China. We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.
The decision to review our business operations in China has been incredibly hard, and we know that it will have potentially far-reaching consequences. We want to make clear that this move was driven by our executives in the United States, without the knowledge or involvement of our employees in China who have worked incredibly hard to make Google.cn the success it is today. We are committed to working responsibly to resolve the very difficult issues raised.
January 10, 2010 -- Extractive Industries Transparency Initiative - EITI is a coalition of governments, companies, civil society groups, investors and international organisations.
EITI - Agreement in Iraq as Prime Minister Al-Maliki Plans to Implement Oil Agreement...EITI stated:
Noori Al-Maliki, Prime Minister of Iraq announced Iraq’s plans to implement the EITI at the Iraqi EITI launch conference in Baghdad. Iraq plans to become an EITI “Candidate” country in February. For too long Iraq’s natural resource wealth has brought the country conflict and corruption, rather than development and prosperity.
The EITI is an instrument to build trust and create a safe forum for wider discussion about the management of the oil revenues. The Government of Iraq formally committed to implement the EITI in May 2008. With 11% of the world’s proven oil reserves, Iraq will become the country with the largest oil reserves to implement the EITI standard.
The EITI is an instrument to build trust and create a safe forum for wider discussion about the management of the oil revenues. The Government of Iraq formally committed to implement the EITI in May 2008. With 11% of the world’s proven oil reserves, Iraq will become the country with the largest oil reserves to implement the EITI standard.
The oil industry is at a critical stage in Iraq following a series of contract awards.
Peter Eigen, Chair of the EITI, sent a greeting which included the following: “With well managed oil resources, the future of the Iraqi people could be very bright. For those of us who have spent our career tackling the root causes of corruption and conflict, and for the whole international community which follows Iraq closely, the Government’s plan to implement the EITI is a massive signal of Iraq’s determination to build a brighter future.”
The launch conference, the Head of the EITI International Secretariat, Jonas Moberg, said: “We believe that the implementation of the EITI will be important in driving the recovery of the nation and ensuring that its abundant oil and gas wealth is managed for the benefit of its citizens and sustained peace. It demonstrates the Government’s commitment to good governance and is part of wider efforts to rebuild the nation. The adaptation of the global EITI standard in Iraq shows the Government’s ownership and dedication to develop its own transparency and governance framework.”
- EITI noted that 3.5 billion people live in countries rich in oil, gas and minerals. With good governance the exploitation of these resources can generate large revenues to foster growth and reduce poverty. However when governance is weak, it may result in poverty, corruption, and conflict. EITI aims to strengthen governance by improving transparency and accountability in the extractives sector. More information from EITI.
January 7, 2010: New Haven Declaration On Human Rights and Financial Integrity
Amnesty International, Human Rights Watch, Global Financial Integrity, Oxfam and others sign precedent-setting declaration as Anti-Money Laundering and Human Rights organizations join together in what they have named the New Haven Declaration (following a meeting at Yale University in New Haven):
- Human rights and international financial integrity are intimately linked. Where poverty is pervasive, civil, political, and economic rights often go unrealized. Today, large outflows of illicit money - many times larger than all development assistance - greatly aggravate poverty and oppression in many developing countries.
- Illicit money leaves poorer countries through a global shadow financial system comprising tax havens, secrecy jurisdictions, disguised corporations, anonymous trust accounts, fake foundations, trade mispricing, and money-laundering techniques. Much of this money is permanently shifted into western economies.
- Reducing these illicit outflows requires greater transparency and integrity in the global financial system. Achieving this is a prerequisite to creating an economic framework that is open, accountable, fair, and beneficial for all.
- We call upon the United Nations, the G8, G20, WTO, IMF, World Bank, and other international fora, as well as on national governments, world leaders, faith groups and civil society organizations to recognize the linkage between human rights and financial transparency. We further call for decisive steps to ensure that developing countries can retain their resources for sustainable growth and poverty alleviation, which they must achieve if the human rights of all people are to be realized.
- The undersigned individuals and organizations shall be working together in the coming months to pursue this agenda and look to add additional voices to this effort.
The undersigned individuals and organizations shall be working together in the coming months to pursue this agenda and look to add additional voices to this effort.
Amnesty International, Human Rights Watch, Oxfam, Global Financial Integrity, Center for Applied Philosophy and Public Ethics, Open Society Institute Justice Initiative, Asia Initiatives, Task Force on Financial Integrity and Economic Development, Tax Justice Network, Christian Aid, National Council of Churches, Harrington Investments, Inc., Asociación Civil por la Igualdad y la Justicia, Thomas Pogge, Yale University, Robert Hockett, Cornell University, Frank Pasquale, Seton Hall.
for statements and more background please visit Global Financial Integrity
- January 7: BLOOD DIAMONDS -- Global Witness today welcomed a decision by the Zimbabwean authorities to cancel a planned auction of diamonds from the Marange fields but warned that the country must take concrete steps to demonstrate their commitment to cleaning up the diamond sector or risk suspension from the Kimberley Process certification scheme. (read the full report)
- December 16, 2009
Robert Morgenthau retires with a final important case and message
Manhattan District Attorney Robert M. Morgenthau, who has held this public office for 35 years and is about to retire at the age of 90, has filed a final important case. Credit Suisse has agreeed to pay a fine of $536 million. The bank was charged with assisting Iranian, Libyan and Sudanese clients to violate US sanctions and, by means of false documentation, place funds in the Amderican financial markets.
Morgenthau has not only been the model fearless and ethical public prosecutor, going after the Mafia, corrupt industrial titans and crooked politicians, but he has tirelessly gone after money-launderers, dating back to the mid-1980s when he led investigations against the Bank for Credit and Commerce International (BCCI).
In commenting on the Credit Suisse case he noted that it was unprecedented for a Swiss Bank and the Swiss government to provide the kind of access to data and records that they did once faced with the US allegations. Mr. Morgenthau said: “The standards of transparency have come a long way since I first began investigating financial crime in the 1960s. From secret Swiss and Liechtenstein accounts then, to the conduct of BCCI in the 1990s, to this year's actions involving Iranian banks, the standards of transparency have risen, and we expect more from international financial institutions today than ever before. Credit Suisse's transgressions in this regard were severe - they intentionally hid the involvement of Iranian banks for almost two billion dollars in U.S. dollar transactions. But, to their credit, from the time we contacted them they gave us excellent cooperation and a high degree of transparency, as well as detailed analysis from their internal investigation. The message to other banks involved in similar practices should be clear: if you are engaged in sanction-busting misconduct, you should self-report, clean up your shop, and give us a full accounting. That is what we should expect and demand from major international banks.”
(click here for the full statement)
- On the Record - Obama, Immelt.
On acceptring the Nobel Peace Prize on December 10, President Obama said - “A just peace includes not only civil and political rights -- it must encompass economic security and opportunity. For true peace is not just freedom from fear, but freedom from want. It is undoubtedly true that development rarely takes root without security; it is also true that security does not exist where human beings do not have access to enough food, or clean water, or the medicine and shelter they need to survive. It does not exist where children can't aspire to a decent education or a job that supports a family. The absence of hope can rot a society from within.”
Jeff Immelt, Chairman and CEO, GE made the following comment in a speech at the United States Military Academy, West Point, on December 9 - "Leaders must like and respect people. I think we are at the end of a difficult generation of business leadership, and maybe leadership in general. Tough-mindedness, a good trait – was replaced by meanness and greed – both terrible traits. Rewards became perverted. The richest people made the most mistakes with the least accountability. In too many situations, leaders divided us instead of bringing us together. As a result, the bottom 25% of the American population is poorer than they were 25 years ago. That is just wrong. I was recently at an event with some unemployed steel workers. Their stories are truly sad. They just want to work. They want to be led. What is my responsibility? What will your responsibility be someday? Technically, nothing. Financially, nothing. We do
not have to care. But we should. It begins by people telling the truth. We do have to compete to be great; we must improve training and education; we cannot protect everyone in a global economy. In my career, I have had to deliver difficult news that I believed was in the best interest of the enterprise. At the same time, ethically, leaders do share a common responsibility to narrow the gap between the weak and the strong. I have taken on the challenge to increase manufacturing jobs in the United States. These are the jobs that have created the midwestern middle class for generations. Manufacturing jobs paid for college educations, including mine. They have been cut in half over the past two decades.
Many say this is a fool’s mission. I don’t have all the answers. What I can bring … what GE can bring … are investments, training and operating approaches to help everyone win. The residue of the past was a more individualistic “win-lose” game. The 21st century is about building bigger and diverse teams; teams that accomplish tough missions with a culture of respect. We are committed to renewing American leadership. We are developing better listeners; systems thinkers. We are
creating structures that build speed around competency."
governance news/top pay
July-August - from the European Commission in Brussels, to various legislative bodies across Europe, to the desk of the powerful U.S. finance committee chief in the House of Representatvies, Barney Frank, a host of proposals are about to be made to impose limits on what bankers get paid. The U.S. House of representatibves has now passed new rukles on pay at banks and Congressman Frank declared "“There is a risk to the system when the incentive structure is huge,” as his committee approved legislation that Bloomberg reported "would let regulators ban incentive pay at banks and give shareholders a vote on bonuses in response to public outrage over Wall Street pay." The influential New York Times calls for action and warns in an editorial of big bonus payments.
The Associated Press reported that the UK's Fimnancial Services Authority laid out has laid out plans to curb risky pay practices in banks but dropped some of the tougher measures that had been proposed. It said banks should spread two-thirds of the bonuses of senior employees over three years. But its code of practice, to be introduced next year, excludes specific measures on deferred bonuses as well as the linking of payouts to the performance of banking groups as whole.
Sir David Walker has just finalized a report called for by the UK Government where he stresses that controls on pay need to be viewed in terms of broad reforms of corporate governance. His report is remarkable. The guiding theme is important and simple: “In an open market economy in which, in normal times, most companies are either listed
or in private hands, the achievement of good corporate governance reflects successful
balancing among an array of influences which is probably at its widest in case of banks.
A critical balance has to be established between, on the one hand, policies and
constraints necessarily required by the regulator and, on the other, the ability of the
board of an entity to take decisions on business strategythat board members considerto be in the best interests of their shareholders.” (...see Executive Compensation). Sir David Walker has said that among the 39 major proposlas in his report are : ' Recommendations on remuneration that are as tough or tougher than anything to be found elsewhere in the world.