In the News
Below is a selection of news headlines from around the world from the past month. Please see our disclaimer immediately below the news section.
Asia & Pacific
U.S. Payments To Pakistan Face New Scrutiny
Copyright Washington Post, 21 February 2008
The US Congress is considering new measures to improve scrutiny of the Defense Department’s military assistance package to Pakistan. Payments to Pakistan are reported to have been in the region of US$80m per month, or about US$1bn per year, over the past six years. Lax scrutiny of the payments, poor accounting, arguments over expenses, and suspicions of overbilling, have contributed to concerns over the package.
The Indian Defence Minister has strongly rejected reports that India was preparing to reverse its ban on the use of middlemen or commission agents in defence deals.
Europe
Moscow court sentences Russia's former atomic energy minister to 5 1/2 years in prison
Copyright Associated Press, 20 February 2008
Russia’s former atomic energy minister Yevgeny Adamov has been sentenced to five-and-a-half years in prison. Mr Adamov had been accused of stealing from US government funds earmarked for strengthening security at nuclear facilities in Russia.
BAE: secret papers reveal threats from Saudi prince
Copyright The Guardian, 15 Feb 2008
The Guardian reports on the first of two days of the Judicial Review into the decision to terminate the Serious Fraud Office's investigation of BAE Systems.
Related article:
Britain powerless in face of Saudi threats, court told , Copyright The Guardian, 16 February 2008
BAE corruption probe turns to commissions
Copyright Sunday Telegraph, 2 March 2008
The United Kingdom’s Serious Fraud Office has enhanced its investigations over the past three months into allegations of bribery at BAE.
Whitehall revolving door under scrutiny
Copyright FT, 22 February 2008
The House of Commons public administration committee is examining the ‘revolving door’ between the public and private sectors, with suggestions that procedures should be tightened to make them more akin to US-style regulations. Cases such as that of Sir Robert Walmsley, former chief of defence procurement, who took a job with General Dynamics a year after the company was awarded a $2b contract from the Ministry of Defence were highlighted.
Corruption Investigation course
Copyright UK Anti-Corruption Forum, February 2008
A new corruption investigation course has been developed by the Ministry of Defence Police. The course is designed to provide investigative tools to examine corruption in the UK and to obtain evidence from outside the country.
Americas
US Defence Contract Loss An Election Issue
Copyright Sunday Telegraph, London, 2 March 2008
A $35 billion U.S. Air Force contract for refuelling aircraft that was cancelled in 2004 following the exposure by Senator John McCain of corruption involving two senior executives at Boeing has now been awarded to rival Airbus in partnership with Northrop Grumman. Oversight hearings on the decision are likely to keep this topic in the public eye in the run-up to the November election.
‘An Intolerable Fraud’ - editorial
Copyright New York Times, 8 February 2008
A number of military related charities that were awarded a 'grade F' in a study last December by the American Institute of Philanthropy, a nonprofit watchdog group, in some cases spent up to 80% of total donations on overheads and expenses. This editorial calls for stricter oversight and disclosure rules.
12 Years for Contractor in Bribery Case
Copyright Associated Press, 20 February 2008
Brent Wilkes, a defence contractor, has been sentenced to 12 years imprisonment on bribery charges. Mr Wilkes had been found guilty of bribing Rep. Randy ‘Duke’ Cunningham.
Inside the world of war profiteers
Copyright Chicago Tribune, 21 February 2008
This report details a Federal probe into allegations of graft among contractors in Iraq.
Middle East
Kuwait runs interference in Iraq war fraud case
Copyright USA Today, 21 February 2008
The Kuwaiti government has attempted to prevent the prosecution for fraud of Kuwaiti residents and companies working as subcontractors for the US military.
Saudi royal Prince Bandar Bin Sultan's assets frozen
Copyright The Sunday Times, 10 February 2008
The US assets of Prince Bandar Bin Sultan of Saudi Arabia have been frozen in relation to a class-action lawsuit regarding corruption allegations at BAE Systems.
Related article:
U.S. Judge Blocks Bandar Funds Transfer , Copyright Associated Press, 10 February 2008
Arms and the man: Something rotten at IAI
Copyright Haaretz, by Yossi Melman, 24 January 2008
Following an appeal by NGO ‘Ometz’, the Attorney General’s decision to close an investigation into suspected corruption involving Moshe Keret, former CEO of Israel Aerospace Industries, is under review. This article focuses on the failure of the authorities to bring the case to court, the role of an unnamed agent, and his relationship with Keret.
Africa
Whiff of rot in Angolan arms deal
Copyright Mail & Guardian (SA), 16 February 2008
Rear Admiral Johny Kamerman, formerly the project director of South Africa’s corvette acquisition programme, has become entangled in an investigation into Thyssen Krupp by the Dusseldorf Prosecutors office.
State accuses Zuma, Thint of cover-up bid
Copyright Business Day (SA), 3 March 2008
ANC President Jacob Zuma and Thint, the French arms company, have been accused of attempting to cover-up evidence. They have also been accused of attempting to deprive the prosecution of incriminating evidence from Mauritius, according to the submission made by the state to the Constitutional Court.
Related articles:
'Shaik won't admit to bribe', Copyright Cape Times, 28 February 2008
Zuma appeals to Constitutional Court in graft case, Copyright Reuters, 14 February 2008
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 Digest is a free publication of Transparency International UK.
Interview
Francois Vincke
Chairman, Anti-Corruption Commission of International Chamber of Commerce, &
Chairman, Transparency International Belgium
February 2008
The Defence Anti-Corruption Digest caught up recently with Francois Vincke of the International Chamber of Commerce (ICC). Vincke has also been heavily engaged with Transparency International Belgium in recent years. We spoke first on general corruption issues, before moving into the detail of his work.
“When you look at Transparency International’s Bribe Payer’s Index which is published every few years, you see that evidently defence and aerospace are exposed to corruption. One of the important dangers is the use of agents and intermediaries. Defence companies, although some are very, very large, cannot have producing or even marketing entities everywhere in the world, so they need to go to third parties to approach potential customers. It is quite evident that there is an economic need for agents and intermediaries. At the same time the risk of these agents and intermediaries abusing the situation is very important. In the new Common Industry Standards (CIS) much attention was given to the agents and intermediaries.”
‘Common Industry Standards’ refers to Vincke’s ongoing work with the AeroSpace and Defence Industries Association of Europe (ASD), to develop anti-bribery standards:
“The major companies at ASD wanted to have recognition for their work on integrity programmes, training programmes and compliance. These were things they felt had not been recognised. There was also pressure coming from the US to get European firms to adopt rules laid down by the US. ASD, however, wanted to develop their own standards, based on a benchmarking process, to compare practices, determine good or best practices and create common standards at a high level. An Ethics and Anti-corruption Taskforce was created 28 April 2006, with its first meeting in September 2006.
I prepared a first version of my working report in November that year. By June 2007 there was approval of the document by the ASD council. Then the document was submitted to the national associations which make up ASD in Barcelona in October 2007, and those national associations were invited to sign an “Endorsement Sheet” and encourage their individual member companies to sign a “Statement of Adherence”. Now most associations have signed it. There is ongoing work in obtaining the signature by the corporations of the statement of adherence.”
Enforcement of the Common Industry Standards is likely to become an important issue. Asked how it addressed adherence and enforcement, Vincke stated:
“The creation of a European forum will allow the situation to be followed more closely, for standards to be changed as necessary according to changing circumstances, and for members to be informed of progress and the evolution of practices through the national associations. The underlying idea of a forum is that it would allow for a flow of information.”
“It is in the self interest of companies to be steadfast in anti-corruption”
The importance of making industry standards as far-reaching as possible being long recognised by Transparency International UK, we asked Vincke to expand on measures to extend standards beyond Europe.
“The next step is outreach, convincing the US and rest of world to share our approach, which we hope they will do, at least in its general approach if not in every full stop and comma. After the US, we have to convince the emerging economies – Russia, China, India, Israel – to join in this common approach.
First, we would like to obtain within Europe a certain status with the Common Industry Standards, so we look to a number of international organisations to give a kind of “benediction” to them. At the same time, there needs to be a friendly dialogue on both sides of the Atlantic. We really feel that we are very close to what the Americans have as an approach. Further, we think it is important to stress that the standards are going to be implemented in real life in the corporations because of the endorsement by the national associations which have the power to convince even their small members. American companies will be impressed by this. On their side, only the major contractors are bound by rules of the Aerospace Industries Association (AIA).
From there on, we want to be in contact with national professional organisations in the most sensitive emerging economies, those outside the OECD. It is important to know that Russia, China, and India are showing increased interest in the OECD. These countries may have an objective interest to show a willingness to comply with the OECD Anti-corruption Convention. At the same time, these countries are aware that in their defence industries they should be in a position to make a joint venture with OECD companies, which cannot happen without abiding by the OECD rules. We hope gradually those companies will be convinced that it is in their self-interest to have a common approach.”
The role of company leadership is of vital importance in tackling defence corruption. Vincke made the following points in regards to company leadership:
“Company executives must first be aware that they can’t escape the problem. It is not just a defence sector problem; everyone is exposed to corruption risk. The leadership of the company should be aware that the problem exists in all cultures, all companies, all countries, in the past, in the present, and in the future. There is a need to tackle the island attitude of, “I’m not concerned with corruption – it doesn’t affect me”.
In regard to large defence groups, following many seminars and discussions in many countries, I’d say they have to bite the bullet. It will cost something to make the initial movements, and the process must be seen through to the end.
Companies must invest in integrity and draw up integrity programmes and a large number of them are doing this effectively. Such programmes contain a full range of measures, including whistle-blowing, designating compliance officers, providing information, defining and applying sanctions, the whole lot. It has to be more than talk about principles and values; I am totally convinced that the key element of ethics is compliance. There have to be good codes of conduct, strict processes and rigorous implementation. Companies have to be detailed in their approaches, otherwise the danger is that it becomes hypocritical. Corporations cannot take refuge in larger high-standing lofty principles.”
Vincke also had suggestion on how Defence Ministries and Governments can help address anti-corruption measures in the defence industry:
“Defence officials can impose a certain number of integrity conditions in their contracts, formed through open discussion with the Defence Ministry and particularly procurement officials. Integrity conditions must be designed in a way that makes it possible to comply with and should not lead to an excessive administrative burden.”
Turning to more general issues relating to international conventions, we asked Vincke about the impact on the OECD Convention of the termination of the Serious Fraud Office’s investigation into alleged corruption in contracts between the UK and Saudi Arabia:
“We have a good convention, which should be implemented by strong national implementation legislation. In the UK, that evolution into modern and effective legislation has probably not taken place yet. There is also a need for harmonisation of judicial procedures. In the UK, there is the possibility for a Minister to exert a negative injunction on investigators. The end result is that an investigation can be suspended for reasons which are uncertain.”
Finally, Vincke had the following key message for anti-corruption reform in the defence sector:
“There is strong competition in the defence market and strong competition between companies and countries. As there is strong competition, they really have an clear interest in helping creating a level playing field. It is therefore in the self interest of companies to be steadfast in anti-corruption.”
Our Work
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13th International Anti-Corruption Conference
Mark your calendar!
The 13th International Anti-Corruption Conference to take place in Athens, Greece from 30 October to 2 November 2008.
Come together with the leading experts and practitioners on governance, corruption and transparency at the 13th edition of the world’s leading International Anti-Corruption Conference (IACC), as we survey the role of corruption and governance in the crucial social, political, economic and environmental questions that will define the quality of life for people across the globe, today and tomorrow.
Since its inception in 1983, the biennial IACC has become the premier global forum for effective global and national anti-corruption advocacy and action. Government officials, civil society and business people meet to exchange experiences and ideas about the fight against corruption, assess existing strategies and develop new approaches. Transparency International, which serves as secretariat to the IACC Council, is working with its national chapter in the country, Transparency International Greece and with the generous host, the Government of Greece to prepare the conference.
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