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Corruption Investigations

In addition to the articles here, please also see other pages at EthicsWorld, including News, and Investigations and Prosecutions in the Corporate Governance section, for more information on corruption investigations.

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“The Donors Who Turn a Blind Eye to Kenyan Sleaze”
A Financial Times Editorial by Michael Holman
February 16, 2006

In his article (available for subscribers to the FT or FT.com), Michael Holman, former FT Africa Editor (and author of the new novel, Last orders at Harrods) castigates aid donors for repeatedly providing funds to corrupt regimes, the most recent being the current Kenyan government. Tracing past aid flows to Zaire and to Kenya, Holman shows how political factors, business ties and old habits all combine to convince donors to support corrupt governments.

Holman, who served as the FT’s Africa Editor for more than two decades, has expertise on Kenya and he details the courage of former Kenyan ethics and corruption Minister John Githongo in providing exceptionally detailed accounts of current Kenyan corruption to a special meeting of Kenya’s parliamentary public accounts committee in London last weekend

Allegedly, around $700 million has been stolen by top officials. But, stressed Holman, it is important to note that the United Nations, the World Bank and the British Government continue to pour aid funds into Kenya. While these donors suggest that their money bypasses the corruption and serves the poor, Holman reports that every social indicator in Kenya points in one direction - downwards.

Holman concludes: “By insisting on maintaining aid, Paul Wolfowitz, World Bank president, and Hilary Benn, Britain’s aid minister, are not only forgetting the past. They are arrogantly insisting that they know what is best for Kenya. Had they bothered to ask Mr. Githongo what they should be doing, the answer, I suspect, would have been very different.” 

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Kenya: Major Scandal Likely As Former Top Official Prepares To Go Public

John Githongo's Actions May Set Important International Precedent

Former Kenyan Ethics and Governance Permanent Secretary John Githongo, who has resided in the UK for the last year on resigning his office, is reported in the Kenyan media to have prepared a 90 page dossier, which it is said he plans to make public, which detailed major corruption involving some of the most senior officials in the Government.

Mr. Githongo, the former head of Transparency International Kenya, has not been intimidated by threats and his revelations may set an important precedent - very few public officials have ever quit office and gone public to provide precise details on alleged corruption by a current government.

On January 20, 2006, The Guardian in the UK, which has been in touch with Mr. Githongo, carried the following story which we excerpt:

Top ministers face inquiry into corruption allegations in Kenya

Government Under Threat As Claims Threaten to Have Knock-On Effect for Donors Across Africa

Michela Wrong and Duncan Campbell
Friday January 20, 2006

The vast scope of the allegations is likely to have serious ramifications for the government and could affect how Britain and international organisations deal with African nations that are suspected of similar activities. Kenya's vice-president and two cabinet ministers are among more than 30 people summoned by the Kenyan anti-corruption commission (KACC). The former internal security minister Chris Murungaru had already been summoned to appear over the weekend to explain his personal wealth. The commission said those would "not be the last notices to be issued".
Shortly after news of the summons broke, Mwai Kibaki, Kenya's president, warned his cabinet: "You are required not only to be on guard against corruption, abuse of office, and influence peddling in all forms, but also to actively participate in the fight against the vice by being alert."

The high-level investigation, on which will hang the credibility of President Kibaki's government of three years, has been prompted by a report from John Githongo, the former permanent secretary for governance and ethics, who sought exile in Britain last year.

From Oxford, Mr Githongo compiled the 36-page critique, which was sent to Mr Kibaki and the anti-corruption chief, Aaron Ringera. Mr Githongo told the Guardian that he welcomed Mr Ringera's actions. "I am pleased to see things seem to be moving on these issues. I am determined that Kenyans get to know the whole truth as soon as possible."

Media reports suggest that the focal point of Mr. Githongo's allegations is a company called Anglo Leasing and Finance that the government had planned to pay £20m for a sophisticated passport equipment system and another £29m for forensic science laboratories, which were never provided.

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United Nations Investigating 200 Charges of Procurement Abuse


New disclosures of widespread abuse in the use of official United Nations funds are now adding to pressures for far-reaching management and governance reforms at the organization. These new allegations, which relate to fraud and abuse in U.N. peacekeeping operations, follow the totally separate report, published in late October 2005 by the Volcker Commission on the UN-Iraq oil-for-food scandal (please see stories below on this page). A core concern of the Volcker Commission was management failure at the helm of the United Nations. The evidence made public by the Commission provided the United States delegation to the United Nations, as well as some other national delegations, with a solid basis for calling for far-reaching reforms of the governance systems of the organization. The new disclosures on peacekeeping operations will now add formidably to the pressures for reform at the United Nations.

A central issue in this context relates to the moral authority of the United Nations to counter corruption and call on its member governments to improve their own governance when the U.N. itself is found to have serious shortcomings.  This not only applies to governments, but also to corporations as a key principle of the U.N. Global Compact relates to corruption (please see our page on CSR Standards and Principles)

Judy Aita, United Nations Correspondent of the Bureau of International Information Programs, U.S. Department of State, reported on January 24, 2006 that internal U.N. investigations have uncovered 200 instances of alleged procurement mismanagement and fraud in peacekeeping operations and at U.N. headquarters. Eight staff members have been placed on special leave and investigations could involve tens of millions of dollars. A U.N. report on the abuse noted that "substantial evidence of abuse in procurement for peacekeeping operations leading to financial losses and significant inaccuracies in planning assumptions" had been uncovered. The report also said "the design and maintenance of controls needed to ensure that U.N. procurement complies with financial rules and regulations were insufficient.  Important controls were lacking while existing ones were often bypassed,"

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Reform of United Nations' Approaches to Management Seen As Critical

Paul Volcker issued a final UN oil-for-food Iraq report on October 27, 2005 with allegations that over 2,200 companies were engaged in illegal schemes with the former Iraq regime involving over $1.7 billion of illicit payments. The former US Federal Reserve Chairman stressed that his prime concern at the end of his investigation is management in the United Nations and the vital need for reform here. He underscored that bribery is all too frequently made possible when official oversight is inadequate.
According to the final report, DaimlerChrysler AG, Siemens AG, and Volvo AB are among 2,253 companies that allegedly paid illegal kickbacks to Iraq to win business from an aid program designed to allow Saddam Hussein to sell oil to buy food and medicine. Much of the information is based on records kept in Iraq and Volcker stressed that allegations need to be viewed with caution. It also appears that a good deal of the illicit payments were made through agents.

Russian companies, followed by French companies, are the most numerous on the list of those said to have paid bribes to win contracts to supply products. Iraq derived $1.5 billion from kickbacks and $229 million in illegal surcharges from 139 oil traders. Iraq required humanitarian contractors to pay these 10 percent fees, which exceeded transportation costs, directly to Iraqi-controlled bank accounts or to front companies that forwarded the money to the government. About 60 percent of all companies involved in the oil-for- food program paid oil surcharges or kickbacks on humanitarian goods for Iraq totaling $1.8 billion.


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The United Nations – Oil-for-Food Scandal

Editorial by the Wall Street Journal, September 9, 2005

Before the publication of the final Volcker Report in November, 2005, the focus of attention has been on U.N. management and Volcker was to stress this again in his final November press conference. The Wall Street Journal editorializes about the “largest fraud ever recorded in history.” The editorial writers at The Wall Street Journal have never taken a gentle view of management at the United Nations. But, they have spared no punches in an editorial on September 9, 2005. Their central focus is on the management of the United Nations under Secretary General Kofi Anan. The basic text is the report by the Paul Volcker Commission on the Iraq oil-for-food program and the basic issue is corruption. The Journal noted that this was “the largest fraud ever.’ It continued; “press reports often cite the overall size of Oil for Food at $60 billion, but Mr. Volcker's report makes clear that the real figure was in excess of $100 billion. From this, Saddam was able to derive $10.2 billion from illicit transactions. But the important point is that he was able to steer 10 times that sum toward his preferred clients in the service of his political aims.

“None of this happened by accident. Mr. Volcker's report is replete with examples of incompetent U.N. oversight and tales of political wrangling among the permanent members of the Security Council. But the abiding fact is that it was the Western powers, not Saddam, who wanted Oil for Food at virtually any cost, because it offered the appearance of a meaningful policy in the absence of a real one, namely regime change. And it was the political convenience of this chimera that led the U.S. and the U.K. to tolerate, and the rest of the Security Council to feast on, the opportunities for corruption that were inscribed in the very nature of the program.

“As for the U.N., it proved its worth to Saddam as the one hall of mirrors in which such shenanigans could take place. Yet even now we are told that "at least" Oil for Food fed the Iraqi people when they were on the edge of starvation, and this is accounted a U.N. success. That is false. Oil for Food offered a lifeline of cash and influence to a regime that was starving its people. The program did not corrupt the U.N. so much as exploit its essential nature. Now Mr. Annan wants to use this report as an endorsement of his "reform" proposals. Only at the U.N. could he dare to think he could get away with this.”

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