Corruption Report

‫تقرير الفساد الصادر عن مركز‬ ‫المصداقية للشفافية السياسية‬

‫ احمد قرة‬: ‫اعداد‬ ‫عالميا‬

Record US fine ends Siemens bribery scandal

• Cost of case to German firm totals €2.5bn • Former

US authorities fined the German engineering group Siemens a record $800m (£523m) yesterday to settle a long-running bribery and corruption scandal. Siemens also agreed to pay a fine of €395m (£354m) to settle a case in Munich, its home town, over the failure of its former board to fulfil its supervisory duties. It was fined €201m there a year ago over bribery by its former telecoms division. Yesterday's fines, in the biggest

corporate scandal in post-war Germany, bring the total cost to Siemens so far to €2.5bn, including €850m in lawyers' and accountants' fees, officials in Munich said. These include Debevoise & Plimpton, Deloittes and PricewaterhouseCoopers. The US settlement, after a year of negotiations and plea bargaining, sees Siemens pay the US department of justice about $450m (€350m) to settle charges of bribery and trying to falsify corporate books. The securities and exchange commission (SEC), the market regulator, will receive another $350m (€270m) on similar charges under the Foreign Corrupt Practices Act. The DoJ said it was the biggest such case it had ever seen in "scope and magnitude". Siemens had once feared it would have to pay a penalty of up to $5bn. But, after co-operating with the US authorities and initiating an amnesty

for whistleblowers over bribes paid to win lucrative overseas telecoms and power contracts, it set aside €1bn of provisions last month. The US case, at the district court for the District of Columbia, was settled after judge Richard Leon accepted guilty pleas from Siemens' lawyers over a slush fund totalling more than €1.3bn and used to win overseas contracts from 2001 to 2007. The scandal has cost Siemens, a symbol of German engineering excellence and corporate probity, not only its reputation and that of former senior executives but more than €1.6bn in costs. The company is being investigated in scores of countries around the world, two ex-board members are under criminal investigation and a senior manager was recently given a suspended twoyear sentence. But the settlement is a personal coup for the Austrian chief executive, Peter Löscher. The first non-German

chief, who was brought in to clean out the Augean stables, appointed a US lawyer, Peter Solmssen, as the company's first compliance director, with a seat on the main board. Solmssen said the rulings ended a painful chapter in the group's 162year history. The spotlight now turns to former executives such as ex-chairman and chief executive Heinrich von Pierer, who is under heavy suspicion by the US authorities of failing to stop the bribery when he and his board were informed. He has consistently denied any knowledge of corruption. Without naming names, the DoJ and SEC findings both point the finger at the former board for failing in its fiduciary duties, insiders said. Siemens, which is already demanding compensation from 11 former executives, said these cases were unaffected by the corporate settlement. Yesterday as part of the US

settlement, Löscher said Siemens had made Theo Waigel, former German finance minister, its first "compliance monitor". The appointment, demanded by the US, normally goes to an American, usually a former US prosecutor or federal judge. Waigel, an architect of German monetary union after the fall of the Berlin Wall, will report to the US authorities on Siemens' implementation of new compliance measures. Löscher said: "We regret what happened in the past but we have learned from it and taken appropriate measures. Siemens is now a stronger company." Gerhard Cromme, who replaced Von Pierer as chairman in 2007, said: "The corruption cases in Germany and the US are now over. Today marks the end of an unprecedented two-year effort to resolve extremely serious matters." The group said its "extraordinary cooperation" in the US case meant that

the US defence logistics agency, the leading body awarding federal contracts, had reaffirmed it as a "responsible" contractor. But its shares closed down 0.5% in Frankfurt at €47.17.

‫سنغافورة‬ Tough graft battle in Asia despite campaigns SINGAPORE ) - Fugitive former Thai Prime Minister Thaksin Shinawatra is looking for an exile home to avoid a prison sentence for corruption. An exIndonesian central bank chief has been sent to jail for five years on corruption charges. Malaysia's ruling party is shaken to its foundations after voters lift the opposition to unprecedented gains on a groundswell of revulsion over patronage and corruption. Philippine President Gloria Arroyo dodges impeachment over deals with China

that were canceled due to suspected graft. For years, corruption has greased the wheels of commerce and politics in Southeast Asia, a favored destination for investors in emerging markets. Today, government leaders across the region are on the defensive over corruption issues. Anti-graft campaigns have acquired momentum. Empowered anti-corruption bodies are cracking down. Invigorated judiciaries are prosecuting the miscreants. Companies looking at tempting but unfamiliar markets are also waking up to corruption risks to avoid costly penalties and to protect their brand names. So have things really improved? Actually, not a whole awful lot, experts say. ‫اندونيسيا‬

INDONESIA MUCH BETTER

Global corruption watchdog Transparency International has found little discernible change in the emerging markets of Southeast Asia in its 2008 table of perceived corruption. Indonesia has significantly improved. Malaysia and the Philippines have slipped a few rungs. Thailand is more or less the same, while others such as Cambodia and Myanmar are wallowing at the bottom of the league tables. Indonesian President Susilo Bambang Yudhoyono, perhaps with an eye on elections next year, has cranked up an anti-graft campaign in a country long viewed as among the most corrupt in the world. Not only was former Bank Indonesia governor Burhanuddin Abdullah jailed for bribing members of parliament, a

relative of the president by marriage was questioned in the scandal. The five-year-old Indonesian Corruption Eradication Commission, has acquired something of a cult status in the world's fourth-most populous nation. Last month, it signed an agreement with the FBI for help with training and investigation. Fauzi Ichsan, an economist with Standard Chartered Bank in Jakarta, said corruption is no longer seen as one of the main barriers to foreign investment in Indonesia. "The government's anti-corruption campaign has been quite revolutionary," he said. What concerns foreign investors the most is not the run-of-the-mill bribes that must be paid to get a phone installed or a shipment

through customs -- some developed countries even allow companies to take tax deductions for these "facilitation payments" -- but institutionalized corruption. "While under-the-table payments are a relatively common thing, what multinational companies object to most is crony corruption that gives special privileges to selected groups with government connections, those winning plum government projects," says Varakorn Sarnakoses at Bangkok's Dhurakij Pundit University. Thailand has been embroiled in three years of political chaos whose proximate cause has been allegations of crony capitalism and corruption in the administration of Thaksin Shinawatra, ousted in a 2006 coup ‫اليونان‬

Greek PM vows to fight corruption after 11-day protest ATHENS) - Greek Prime Minister Costas Karamanlis pledged on Tuesday to tackle corruption after 11 days of violence triggered by the police killing of a teenager and fueled by public anger at scandals and a slowing economy. About 100 youths attacked a police station in Athens, setting fire to a bus and four cars belonging to officers. Students briefly occupied state TV, interrupting the news, and violence flared in the northern city of Thessaloniki. Also, for a second day farmers protesting at low prices cut off the main highway to northern Greece for several hours. Karamanlis said helping Greeks -a fifth of whom live in poverty --

was a priority but his options were restricted by the country's onerous debt, made worse by the riots that quickly spread across Greece and to some other European countries. Greece's worst violence in decades was sparked by the December 6 shooting of a 15-yearold but fed off anger at high youth unemployment and unpopular economic measures as the global crisis buffets its 240-billion-euro ($327.9 billion) economy. "Long unresolved problems disappoint young people: the lack of meritocracy, corruption in everyday life, a sense of social injustice," Karamanlis told his parliamentary team. "The fight against them is hard and constant and we are committed to it." Karamanlis, under fire for his hands-off reaction to the riots,

said he underestimated the public backlash and the scale of a monastery land scandal besetting his government for months. A parliamentary enquiry failed on Monday to seek any prosecutions for the deal, where a Mount Athos monastery got valuable state property in exchange for cheap rural land, costing the state millions of euros. With more protests planned as the budget goes to parliament this week, Karamanlis said income-tax cuts will go ahead. But he warned against high expectations, saying Greece will spend 12 billion euros, about 5 percent of GDP, just to service its debt. "Our top priority is to support those hurt the most ... (but) this debt is a huge burden that reduces the government's

flexibility at a critical time," he said. RESHUFFLE POSSIBLE The opposition socialists, however, said Karamanlis and his party did not understand the severity of the economic situation. "It is obvious they don't understand they've lost the trust of the people and, in these cases, the solution is always given by the people," said PASOK spokesman George Papaconstantinou. Political analysts said the riots raised the prospect of snap elections and Karamanlis was likely to sacrifice some ministers to inject new blood into his conservative government. "Today the prime minister accepted partial political

responsibility," said Theodoros Livanios, director of research at pollster Opinion. "Karamanlis will soon announce a reshuffle of his government and will wait to see the success of this

‫ايرلندا‬ OECD calls on Government to tighten anti-corruption laws The Organisation for Economic Cooperation and Development (OECD) has called on Ireland to strengthen its anti-corruption laws and tackle the issue of Irish companies bribing foreign officials. The Paris-based OECD’s working group on bribery today published its review of a report last year into Ireland’s enforcement of the Convention on Combating Bribery, which was ratified by the Government in 2003. The convention is aimed at reducing corruption in developing countries by

encouraging sanctions against bribery in international business deals. Last year’s damning report found that Ireland had failed to meet its obligations under the convention, most notably in addressing the bribery of overseas public officials by Irish companies. It highlighted the absence of Government efforts to raise awareness amongst Ireland's business community that bribing foreign public officials is a crime punishable by up to 10 years' imprisonment and an unlimited fine. Today’s review called on Ireland to urgently expand corporate liability for acts of foreign bribery. It argued that Ireland's current system means successful conviction of Irish companies for corruption “appears unlikely due to the very high barriers required to establish corporate criminal liability”.

The working group’s review was not entirely critical, noting that the Government had made “significant efforts” to raise awareness of the laws on foreign bribery. An anticorruption website (www.anticorruption.ie) was established by the Government in May to help raise awareness of bribery legislation. The review also welcomed the Prevention of Corruption (Amendment) Bill 2008, "which proposes to make possible the prosecution of Irish nationals for acts of bribery committed entirely abroad, and to provide for the protection of whistleblowers". This bill is currently before the Oireachtas. However, the OECD said it was “disappointed” the Government did not take the opportunity when drafting this amendment to incorporate the two existing laws

governing the offence into one single piece of legislation in order to remove potential obstacles to bringing prosecutions. Minister for Justice Dermot Ahern said the report was encouraging and highlighted the willingness by the Government to improve its approach. Mr Ahern said he had notified the OECD that he was “favourably disposed” to considering implementing some of its recommendations by way of amendment to the Prevention of Corruption (Amendment) Bill 2008. “It is in Ireland’s national interest that we are proactive in this area and that we are seen internationally to treat this offence with the seriousness it deserves,” the Minister said. The OECD working group visited Dublin last June, meeting representatives of the Government,

the Garda, the business community and the legal profession during its three-day trip ‫اوزباكستان‬ UZBEKISTAN: PRESIDENT COMPLAINS THAT HE DOESN’T HAVE ENOUGH INFORMERS Uzbek President Islam Karimov has slammed politicians in his country for being too timid when it comes to reporting cases of corruption. During a December 13 state television broadcast of a recent special session of the Navoi provincial legislature, Karimov complained that politicians seemed more interested in defending their private concerns, rather than promoting the state’s best interests. In particular, he lambasted politicians for remaining silent in the face of rampant corruption. "You know a thousand-fold better than me about who works how: who

is working hard and who is just enjoying life?" Karimov said in a speech to the assembly. "People are not blind. They can see everybody and give their assessment on them. A question arises: the laws provide for regulations needed in modern life; you have been given so many opportunities; why don’t you act?" The session concluded with a vote to sack Navoi regional Governor Bahriddin Roziyev. Karimov then proposed that Erkin Turdimov, the country’s first deputy minister of agriculture and water resources of Uzbekistan, assume the gubernatorial post. The provincial legislature proceeded to unanimously approve the president’s suggested candidate, according to the state television report