| Defence Anti-Corruption Digest Edition 7, August 2006 |
|
Including... Interview: Ian McNamee Saab Asia Pacific: China Targets Bribery in Military Spending Europe: Germany Probes Fairfax Contractor In Iraq Americas: Pinchet loses legal immunity Middle East: Former Iraqi Minister arrested for corruption Africa: Pahad Recalls that He Met French Arms Maker After All 
Transparency International UK's Defence Anti-Corruption Digest
Edition 7 / Aug 06
Defence Against Corruption
This e-mail address is being protected from spambots. You need JavaScript enabled to view it Interview - Ian McNamee Saab 
Feature - Jane's Defence Weekly Opinion Piece
Corruption does not deliver
Opinion – Mark Pyman 16 August 2006
Defence companies and defence ministries are taking a more active interest in tackling corruption. It matters to us all that they succeed, writes Mark Pyman
We are seeing the beginnings of a major mindset change in the defence industry. Corruption, that hidden but sadly necessary part of doing business, is becoming a topic that can be directly addressed by companies and by arms procuring governments. At the Farnborough Air Show in July, the European, UK and US defence industries all made announcements related to the formation of anti-corruption forums or working groups. According to the Aerospace and Defence Industries Association of Europe, the industry is taking the “fight against corruption to the next level” and in the UK, the industry is setting up a UK Defence Industry Anti-Corruption Forum “to encourage and assist the mutual raising of standards”. This represents a significant step forward by the industries to speak openly about a serious issue and to bring companies together to be pro-active in addressing it. Through working with other industry sectors, such as banking and construction, it is apparent that collective action really can make a major difference. Some industries have also been able to collaborate to address complex international ‘reputational’ issues in a substantive manner: the chemicals industry cleaning up through the ‘Responsible Care’ initiative is one example. Right now the world of defence and security desperately needs a powerful dose of anti-corruption thinking and action. Think of the security of a country and how much harder it is when a corrupt defence establishment is present. Think of the post-Cold War history of the defence industry, how it has only recently emerged from an environment where corruption was a well-known part of doing business. In this inter-dependent, post-9/11 world, national and cross-border security systems assume enormous importance. Corruption threatens the integrity of those systems more than anything and, as always, it is ordinary citizens who most feel the consequences. Kenya recently lost its well-respected anticorruption tsar, permanent secretary for governance John Githongo. He resigned, citing evidence of extensive corruption in the government. The saddest and least surprising aspect of the evidence was that much of it related to defence and security contracts; European companies were implicated. Even in a highly sophisticated defence environment like the US, the Darleen Druyun/ Boeing scandal of the leased air refueling tankers shows the ease with which even heavily supervised procurement processes can be circumvented. Transparency International is an organisation focused on proposing and facilitating constructive solutions to reduce corruption. It is a non-profit organisation, founded in Germany in 1993 and now comprises chapters in 90 countries. It has learned that a nation can make progress against corruption and that industry sectors collaboratively can make real progress against corruption. The key is to address the whole system simultaneously. In defence terms this means exporting governments, importing governments and the defence companies – and to be resolutely international. Exporting governments and arms importing governments – at least the reformist ones – express themselves very ready to work in this area. New tools incorporating civilian oversight into defence procurement are being trialled. Concerned defence companies have been talking with Transparency International over the past five years and they are now working as a whole in Europe and in the US. The sooner this expands to bring in other exporters like Russia, China, Brazil etc, the better, as many individuals in these companies and their governments will be actively supportive. Besides the criminality of the offence, there are other serious impacts for companies, which engage in corrupt behaviour. Recent examples, such as the fallout on Compass Group from the UN ‘Oil for Food’ report; or the dramatic fall in sale price as in the withdrawal of Lockheed Martin’s bid for Titan, after due diligence revealed bribes having been paid, are testament. Alternatively, the risk may be very commercial, as in the withholding of permission to acquire companies in the US because of Department of Defense concerns about business conduct standards. So what can companies do? They can raise the topic with company directors and board members; review compliance processes with experts and then extend them down through subsidiaries and through supply chains; commit to the serious investigation of allegations; push for an overhaul of the company culture, making good business conduct an explicit part of it; and most of all, chief executives and board directors can show they are visible on the topic, both inside and outside the company. Across the industry internationally, this needs to be thought of as a multi-year challenge similar to some of the huge technical challenges the industry has successfully tackled: such as network-centric operations. However, companies should first join the European, International and UK defence anticorruption forums and make them a real force for change. Lord Robertson, former NATO secretary general, who is engaged with Transparency International in bringing defence companies together on the issue of corruption, said: “This European forum is an excellent initiative. This is a bid by industry itself to clean up defence sales and to drive out corruption. It will be judged by its effectiveness in reassuring the public and governments and therefore it has to be tough, clear and credible. I am assured that it will be all three.” Mark Pyman works at Transparency International, UK, and is the leader of Transparency International’s work in defence. Reproduced with permission from Jane's Information Group - Jane's Defence Weekly
Below is a selection of news headlines from around the world from the past month. Please see our disclaimer immediately below the news section.
Copryight Reuters, Beijin
2 August 2006
People’s Liberation Army inspectors are reported to be launching a campaign to fight the spread of corruption as businesses try to bribe their way into the military procurement spending program.
13 Kargil defence deals 'clean'
The Indian Central Bureau of Investigation has cleared 13 of 39 defence deals under investigation by it. At least seven are still under scrutiny, including a “coffin scam” relating to the Kargil conflict, and the Denel corruption scandal.
Air Force Officer Nabbed for Selling Secrets Saudi's £10bn arms deal safeguards jobs Copyright The Daily Telegraph
19 August 2006 Copyright The Guardian
25 July 2006
Members of the
Germany Probes Fairfax Contractor In Iraq Copyright Washington Post
5 August 2006
Copyright Agence
7 August 2006 French inquiry into Taiwan frigates scandal hits snag on defence secrets act
Copyright Agence
5 August 2006
Copyright Sunday Independent (
6 August 2006 Copyright The Independent, Associated Press Writer
19 August 2006 Wife, Friend Tie Congressman to Consulting Firm Copyright Washington Post Staff Writers
28 July 2006 Copyright New York Times
11 August 2006 Copyright San Diego Union-Tribune
4 August 2006 Contractor details 'cutthroat' cash machine Copyright The International Herald Tribune
6 August 2006 Washington Deal Maker Details Palm Greasing Copyright New York Times, 6 August 2006
Up to their earmarks in deals
6 August 2006
Copyright Asia Times
1 August 2006
US Iraqi war costs are counted as “emergency” spending, and are therefore are not constrained by the cap on defense spending that Congress imposes on itself. David Isenberg explains in this article how annual war costs are set to rise.
Former Iraqi Minister arrested for corruption Former Iraqi Minister arrested for corruption Copyright Irish Examiner
22 August 2006 Copyright The New York Times
18 August 2006
Zuma defence turns focus on Mbeki in trial Copyright Reuters
2 August 2006
Copyright
Copyright Defense Industry Daily
17 August 2006
Disclaimer
Transparency International (UK) takes no position on the views presented by reporters, commentators, organisations and companies in the materials listed in this email or linked to in our website. As with any such resource, our purpose is to provide access to a wide selection of materials representing diverse viewpoints on a matter of obvious public interest. We do not exercise any editorial control over the materials and cannot guarantee their accuracy. The DACD is a free publication of TI UK, the UK national chapter of Transparency International.
Ian Mcnamee
Group Senior Vice President, International Relations and Business Improvement
Saab
The Defence Anti-Corruption Digest caught up with Ian McNamee to find out about Saab’s policy on dealing with agents, distributors and consultants. McNamee says that Saab’s compliance program has been continuously strengthened over recent years. Without a clear protocol on how things are done, he says, “it will be like the wild west show”
Agents and middlemen have been identified by Transparency International as one of the weakest links in corporate anti-corruption armoury, particularly in the defence sector where agents are used extensively. All too frequently, when bribery cases are finally exposed, an agent is revealed as the conduit for such bribery.
Saab deals with numerous agents, normally over 100 at any one moment. McNamee says "Saab has a uniform way of dealing with them - a specific set of rules we require them to follow, although we try not to burden samll businesses with bureaucracy." Saab works all over the world, USA, Europe, Africa, South America, Middle East, Far East, everywhere... so although there is a different approach to how business is done, we have to have a common way of working. People have to adapt to our way of working."
“People have to adapt to our way of working”
“Saab complies with the national laws of the countries in which we operate and the laws of
Explaining the compliance regime for agents, McNamee says “If someone wants to represent us, or do work for us, they have to go through a regime of proving to us that they are sound individuals, reasonable people, their companies are run properly, they abide by laws. We normally conduct a degree of due diligence, to make sure they pay their taxes, they are law abiding citizens, they are who they say they are. Then we have agreements which last for normally only one year. They have to be renegotiated – there has to be a positive discrimination to make it continue. Most of the people we deal with understand the process and are quite happy to accept it. It’s not a revolution, its an evolution.”
Concluding on the theme of transparency, McNamee states “there is no doubt that it is better to deal in an open and transparent world than in one that is not. A lot of countries we deal with require a good degree of transparency”, and Saab is happy to respond to the needs of its customers - “we are driven by good business sense”.
An overview of our project within the defence sector can be accessed here .
Transparency International UK Defence Against Corruption programme
defence [at] transparency.org.uk
Telephone: 020 7785 6358
|