Grand corruption is the abuse of high-level power that benefits the few at the expense of the many, and causes serious and widespread harm to individuals and society. It often goes unpunished. It concerns millions of victims around the world. It’s time the corrupt face the consequences for their crimes. Together we can make that happen!
Hundreds of concerned citizens submitted nominations and thousands voted for the 15 symbolic cases of Grand Corruption. We were deeply inspired by the commitment and the courage of people like you. We remain convinced that together, we can work to end Grand Corruption and its devastating effects.
Because so many cases received a large number of votes, Transparency International decided to pursue nine of the symbolic cases of grand corruption. These were: Zine Al-Abidine Ben Ali, Felix Bautista, US State of Delaware, FIFA, the Akhmad Kadyrov Foundation of Chechnya, Lebanon’s Political System, Ricardo Martinelli and Cronies, Petrobras and Viktor Yanukovych. (See below for more detail on each case)
The nine cases were chosen based on popular voting by the public and also because of their widespread impact on human rights, and on the need to highlight the less visible side of grand corruption, such as laws allowing anonymous companies and those who facilitate corrupt deals.
At first glance, there’s nothing too
remarkable about Delaware – a small, seemingly sleepy state on America’s
north-eastern coast. If people have heard of it at all, it’s probably in
relation to being the home of chemical company DuPont or US Vice-president
Joe Biden.
But mention the second smallest US state to corruption fighters, and they’ll
tell you of a very different Delaware1: a place where extreme
corporate secrecy enables corrupt people, shady companies, drug traffickers,
embezzlers and fraudsters to cover their tracks when shifting dirty money
from one place to another. It’s a haven for transnational crime.
Low taxes, the state’s business-friendly
laws and a sophisticated court system for hearing business disputes draw
thousands of brand-name corporations to Delaware. In fact, nearly 65 per
cent of Fortune 500 companies are incorporated there, making it the state
with more corporations registered within its borders than people. In many
cases, firms flock there for legitimate business reasons – but not everyone
is squeaky clean.
Delaware is also home to thousands of anonymous shell companies thanks to
its strict corporate secrecy rules.
Got dark secrets to hide when setting up a business there? No problem! No
data is collected on beneficial owners, and company formation agents based
in the state can act as nominee directors. It’s a cinch for a criminal to
set up a shell corporation to launder illicit money, and gain access to the
US banking system.
With the backing of an American corporate address to clean up their image,
dodgy firms – including those run by Russian arms dealers and Serbian
smugglers – can conduct their dirty tricks in peace.
Delaware has taken a small step to lift the veil of secrecy, but advocacy
groups say it’s mere window dressing. In 2014, Delaware enacted legislation
requiring some minimal disclosure of corporate ownership – but not to the
public. Heather Lowe, legal counsel for Global Financial Integrity, said the
measure does not “even approach the issue of anonymous Delaware
corporations.’’2
But Delaware is not alone in the US. Nevada and Wyoming have similarly lax
corporate registration laws and have attracted large numbers of shell
companies, along with the registration fees that they add to state coffers.
But Delaware is the leader.3
By hiding behind the cloak of an anonymous company, corrupt people are free
to prey on ordinary citizens without attracting attention from authorities.
According to Global Witness, lawyers used secret companies
from Delaware and Nevada to con elderly people into investing their life
savings in worthless enterprises, while a congressman used anonymous
companies from Delaware and Louisiana to pocket almost half a million
dollars in bribes.
Global Witness describes secret companies as“getaway cars for criminals and
the corrupt across the globe”, but the United States, where you need to give
more personal information to get a library card than set up a company, is
certainly the weakest link.
Photo: Flickr/jstephenconn
Additional sources:
1. New York Times, “How Delaware Thrives as a Corporate Tax
Haven”
2. International Consortium of Investigative Journalists, “Lobby groups ‘see right through’ US state’s
financial transparency attempt”
3. Delaware corporate law, “Facts and Myths”
Money laundering, abuse of power,
prevarication and illicit enrichment amounting to millions of dollars:
Senator Felix Bautista of the Dominican Republic has been accused of them
all1. He is well-connected politically2. Efforts to
prosecute him have come to naught so far3.
It all began in the 1990s in his pre-senator days when he was appointed to
various government positions related to public works, ultimately rising to
become Head of the Office of Supervision Engineers of Public Works a decade
later – a position he held until 2010.
When prosecutors compared what he
reported in his asset declarations and what landed up in his bank accounts
during this time, it became clear that Bautista was amassing wealth that far
outweighed his modest salary of US$ 1,245.20 per month received as a public
official4.
According to a well-documented investigation carried out by the country’s
Public Prosecutor’s Office and referred to the Supreme Court in October 20145,
Bautista established a network of more than 35 companies that were all
ultimately controlled by him. He, with the support of close associates, used
these companies to gain access to public contracts awarded by the public
works office he headed at the time6.
In one instance, Bautista awarded a series of public works projects worth
more than US$130 million7 to a foreign company8, but
some of the funds and the responsibility for delivering some of the work
initially contracted were allegedly transferred to a company that has been
connected to Bautista9.
Bautista allegedly moved his money through bank accounts in Dominican
Republic and abroad, and acquired interests in more than 150 local
properties – including luxury apartments, villas and asphalt
plants10 – as well as a private jet and several radio
stations11.
The Public Prosecutor’s case made use of extensive evidence, including
Bautista and his close associates’ bank statements and tax declarations,
information from company and property registries, registration details of
airplanes and radio licenses, as well as testimonials and other
documents12.
The case against him seemed unassailable13, yet in March 2015, it
was dismissed due to a lack of sufficient evidence14 by a Supreme
Court judge who is a member of the same political party of which Bautista is
a high ranking official. This was contested by broad sections of society and
led to thousands of people taking to the streets in
protest15.
Although the Public Prosecutor’s Office sought an appeal, in October 2015
the Supreme Court upheld its decision that Bautista would not have to face
criminal charges, so the Senator remains a free man16.
Bautista has faced similar allegations in the past. In 2012, he was accused
of bribing Haitian President Michel Martelly to secure
contracts17 and is currently being investigated in Peru for
possible illegal campaign contributions to ex-Peruvian president Alejandro
Toledo18.
According to a 2014 World Bank report chronic poverty in
Dominican Republic is rife and almost one-third of the population remains
poor despite having the skills and assets to generate higher income. If
Bautista had been diverting public funds into his own pockets as so many
have alleged, this can only have served to intensify this cycle of
poverty.
Photo: Prensa809/ CC BY-SA 3.0 Cropped and desaturated
from original
In his five years as president of Panama
from 2009 to 2014, Ricardo Martinelli and his inner circle allegedly
diverted millions of dollars in public funds into their own
pockets1.
There are now more than 200 investigations2 ongoing into
allegedly corrupt deals that took place during his tenure, with Martinelli
himself at the centre of a probe by the Panamanian Supreme Court. He faces
allegations3 ranging from insider trading4,
bribery5, misappropriation of public funds, abuse of power, and
illegal wiretapping6.
Among other schemes, Martinelli and his
cronies are accused of manipulating the allocation of resources to Panama’s
largest social welfare scheme, the National Aid Programme, through rigged
tenders and use of shell companies7.
According to a summary of available audit reports, more than US$100 million
in public funds could have been lost due to corruption8. This
money was allegedly used to buy up luxury mansions and
yachts9.
This country is perceived as among the most unequal in the
world10, where more than 26% of the population lived on less than
US$4 per day in 201211. If this alleged indiscriminate looting
occurred on such a wide scale, it would have denied hundreds of thousands of
children and disadvantaged adults of their right to basic
services12.
Ongoing investigations in Italy have also implicated Martinelli in a
corruption scandal involving a military contractor13 there from
whom the former Panamanian president and other public officials allegedly
received more than US$20 million in bribes to secure a US$250 million
contract14.
Despite the raft of potentially damning allegations, Martinelli has so far
avoided a trial in Panama and is reportedly in hiding15, possibly
in a luxury residence in Miami16, and makes extensive use of
Twitter17 to respond to accusations.
Several former cabinet ministers and public officials are also under
investigation for involvement in corruption schemes during Martinelli’s
term, with some currently responding to accusations from prison18.
As a member of the Central American Parliament (PARLACEN)19 and
president of the political party Cambio Democratico20, Martinelli
also enjoys legal privileges21 and immunities that could delay
further investigation and eventual prosecution, which could only be possible
if he returns to Panama – the country does not allow prosecution in
absentia.
A court hearing in the illegal wiretapping case is scheduled for December
201522 but it is uncertain whether Martinelli will actually
appear before the Court23. Witnesses have reported receiving
calls from people close to Martinelli that make them fear for their safety
and physical integrity24.
There are also concerns regarding the judiciary’s independence in Panama.
The judiciary has been consistently found to be prone to corruption and
inefficient25. The Global Competitiveness Report
2013-201426 states that the independence of Panama’s judiciary is
among the weakest in Latin America.
Photo: Congreso de la República del Perú/CC-BY-2.0/
Desaturated from original
Crony networks, money laundering and
bribery: FIFA is accused of all this, across five continents. The ongoing
investigations suggest that, for years, top officials in the organisation
have been siphoning off millions of dollars to enrich themselves at the
expense of players and fans because they thought they could get away with
it.
Not so anymore.
FIFA’s golden reign of world football
started to unravel at dawn on 27 May 2015 when Swiss police raided a luxury
Zurich hotel, arresting several FIFA top executives. On 25 September, the
president of the organisation Sepp Blatter became part of another criminal
investigation mounted by the Swiss.
The arrests in May followed major FBI inquiry into allegations of
‘rampant, systemic and deep-rooted corruption’ at football’s world governing
body.
The FBI’s indictment now extends to many more officials and executives, and
several of Blatter’s close colleagues have already been arrested and
extradited to the US to face charges. US prosecutors predict further arrests .
A four-year World Cup period generates revenue exceeding US$5 billion, but where does all this money
go?
Because FIFA is exempt from the kind of legal oversight, disclosure and
compliance rules that would be standard for businesses of this size, there
is little transparency in how these funds are used. And it’s FIFA’s poorest
members – dependent on these profits for development – who are hit hardest
by this.
The scandal has shown that football’s world governing body and its executive
committee have no accountability to anyone.
A separate investigation by the Swiss government
into money-laundering involving FIFA’s awarding of the 2018 and 2022 World
Cups bids to Russia and Qatar respectively is also underway, and is reported
to involve as many as 81 cases.
FIFA’s objectives are to improve the game “in the light of its unifying,
educational, cultural and humanitarian values” and “to promote integrity.”
In this, it is failing the millions of players and billions of fans
worldwide. And when FIFA money meant for development appears to be “hijacked” at the top to run “a World Cup of
fraud” , it’s those at the grassroots level who suffer
most.
If football is for everyone, FIFA must be too.
Photo: Agência Brasil (edited)
Ramzan Kadyrov was just 30 years old in
2007 when he became president of Russia's Northern Caucasus Republic of
Chechnya. A former armed rebel leader turned Kremlin loyalist, Kadyrov has
over the years become one of Moscow's most trusted regional leaders and
ruthless satraps1.
With complete immunity, Kadyrov now runs a state within the state where,
according to human rights researcher Tanya Lokshina, "no laws exist except
his own orders2". To assert his unchallenged
authority3 he has been relying on brutal force (with the help of
security forces estimated to be 80,000-strong that report directly to him
rather than to Moscow), intimidation (reportedly involved in
torture4) and a wealth of questionable origin.
Kadyrov, who officially declares an
annual income of about US$75,0005, has built himself a
palace6 (registered under his mother's name)7 with a
private zoo8 in his home village of Tsentoroi and purchased a
stable of race horses9 worth nearly US$2.2 million. International
celebrities such as boxing champion Mike Tyson and football star Diego
Maradona are claimed to have been invited to Grozny to
entertain10 him. A recent investigative report claims that
Maradona in 2011 was paid US$1 million to play a local soccer team captained
by Kadyrov, while Tyson was paid twice that sum to spar with the Chechen
leader in 2005. These exorbitant fees were paid through the Akhmad Kadyrov
Foundation (AKF)11, according to a documentary film by
OpenRussia, an internet-based movement advocating for democracy in
Russia.
Named after Kadyrov's late father, the AKF was set up in 2004 to develop
post-war Chechnya. Although the AKF has indeed added to Chechnya’s
infrastructure, it’s also reported to be one of Kadyrov's main source of
personal enrichment, which he uses at his own discretion, for example to buy
a new player for Chechnya's soccer team12.
The AKF’s millions flow through an intricate network13 of
businesses linked to Kadyrov's relatives and associates, including a food
processing company, Chechnya's licensed alcohol dealer, construction
companies, car dealers and an airline14.
Ever since Kadyrov became president of the Russian republic of Chechnya in
2007, the AKF has been keeping its actual sources of much of its funding
secret. Detailed reports on the work of the fund can only be found on a
personal website of Kadyrov but only cover the period from 2004 to 200715.
Federal legislation on non-commercial entities says that such information
should be made public through the Russian Justice Ministry's database. The
ministry has stated that the AKF is exempt, but this conclusion has been
questioned.
Nearly all Chechen residents – the majority of whom live below the poverty
line16 – are reportedly expected to
contribute between 10 and 30 per cent of their salary to the AKF. Business
people17 are expected to donate up to 50 per cent of their
profits. These contributions alone are estimated at between 45 and 60
US$million a month18.
While Chechen officials deny these allegations as lies, Moscow continues to
turn a blind eye19 on the situation. Neither the Accounting
Chamber nor the Federal Tax Service has ever audited the AKF or indicated
their willingness to do so. They seem content with Kadyrov's boasting that,
besides federal subsidies, the huge sums of money generated by his
impoverished country "come from Allah20".
Photo: Russian Government/ CC BY 3.0/ Desaturated from original
(http://archive.government.ru/docs/17376/photolents.html)
Lebanon suffers from systemic corruption
that permeates state institutions and public services, often extending to
the private sector as well1.
According to Transparency International’s 2014 Corruption Perceptions Index,
Lebanon ranked 136 out of 175 countries. Based on how
corrupt the country’s public sector is perceived to be, a position of 1 is
very clean and 175 highly corrupt.
At the root of this is said to be the
Lebanese confessional political system of power-sharing agreements between
the elite representing different communities, in effect since independence
in 1943. These individuals distribute wealth and services through
clientelist networks that bind citizens to the ruling elite2.
Such informal networks have hindered the development of regulatory state
institutions to challenge rampant corruption3 and contributed to
shrinking space for civil society.
Among Lebanese, it is said to be common knowledge that all major public
sector offices suffer from chronic corruption that has led to the Lebanese
state losing vast amounts of money annually. These include the tax-free
Beirut port4, airport5, traffic law
enforcement6, telecommunications7 and public sector
employment8.
The four councils and funds (majalis and sanadeeq in Arabic) under the
Lebanese prime minister's office and also distributed along confessional
lines, are widely viewed to be the epitome of patronage.
It’s widely believed that investors routinely pay bribes to win government
contracts, which are often awarded to companies close to powerful
politicians.
A 2001 UN-commissioned corruption assessment report on Lebanon found that
only 2.4 per cent of the US$6 billion worth of projects contracted by
government were formally awarded by the Administration of
Tenders9. The rest went to the company willing to pay the highest
bribe to the minister in charge. It’s not surprising that the report found
that over 43 per cent of companies in Lebanon "always or very frequently"
pay bribes.
The garbage crisis in Lebanon is the perfect example of how cosy
relationships contribute to service delivery failure10 and its
devastating effect on citizens.
For over 14 years, the private company, Sukleen, collected and disposed the
garbage of Beirut and Mount Lebanon in numerous locations, most recently in
al-Na’ameh south of Beirut, the site of the country’s largest landfill.
This year residents were finally able to get the landfill shut down, but
authorities failed to find an alternative site. The crisis literally spilled
out onto the streets11, making the air toxic, causing respiratory
diseases and stoking fears of a cholera outbreak.
The Sukleen company is run by a Lebanese businessman known to be close to
the former Lebanese Prime Minister Rafiq Hariri and has
enjoyed monopoly over Beirut’s and Mount Lebanon’s waste management and
street cleaning12.
As a result of this crisis, the "You Stink" popular movement began in August
2015 and set off a chain of protests demanding accountability for the rot at
the heart of the crisis. It’s named after both the mounting piles of trash and its causes.
Photo: Flickr/Kevin Costain/CC BY 2.0 Cropped and
desaturated from original.
Brazil's state-controlled1 oil giant Petrobras is at the centre of the country's largest ever corruption scandal. Involving bribery, kickbacks and money laundering reportedly worth over US$2 billion2, the revelations have shaken Brazil's political leadership and plunged the country into a major political crisis.
More than 50 sitting politicians and 18
companies3 linked to the scandal face investigations, including
Brazilian construction companies4 that allegedly paid bribes to
secure Petrobras business, some of them also known for exporting corrupt
practices to other countries. As of September this year, 50 individuals had
been convicted for corruption, money laundering or related crimes in
relation to Operation Car Wash5 - a wider investigation into
allegedly corrupt contracting practices in Brazil.
UK engineering group Rolls-Royce is also being investigated over allegations
that it paid Petrobras executives bribes in exchange for
contracts6.
Executives from over 20 other engineering firms are thought7 to
have inflated the value of service contracts to Petrobras, channelling funds
into the accounts of Petrobras executives8 and those of political
parties, including the ruling Worker's Party and the Brazilian Democratic
Movement Party, the powerful centrist party which has anchored the governing
coalition9.
Earlier this year Brazilian prosecutors filed lawsuits10 against
some of these firms, seeking over US$1 billion in damages for bribery,
contract-fixing and political kickbacks.
The former treasurer of Brazil's governing Workers party João Vaccari has
been sentenced to 15 years in prison for his role in the
scandal11, while Petrobras's former head of corporate services
Renato Duque received a 20-year sentence for corruption12.
Prosecutors have accused13 the speaker of Brazil's lower house of
Congress Eduardo Cunha with corruption and money laundering, while former
Brazil president Fernando Collor de Mello, who was impeached in 1992 but is
now a senator, has also been accused of corruption for his alleged
involvement14.
The scandal is taking its toll on the country's job market and tens of
thousands of jobs have already been shed15 - most of them
low-skilled ones. It's believed that more losses will follow16 as
the economy contracts and Petrobras's profits shrink.
People are furious at the political elite and big business for allowing such
a culture of corruption to grow. Over a million people17 have
taken to the streets to protest this. What the public needs now is
accountability and assurance that all those responsible for this massive
scandal are brought to justice for any crimes committed.
Photo: Flickr/brunocovas
Additional Sources:
http://mobile.reuters.com/article/governmentFilingsNews/idUSL1N10125S20150724?irpc=932
http://www.forbes.com/sites/kenrapoza/2015/10/25/petrobras-has-another-problem-to-deal-with-oil/
Consider this for extravagance: relatives of former Tunisian leader Zine al-Abidine Ben Ali are reported to have kept a pet tiger fed on four chickens a day in their seaside compound.
Ben Ali, who was ousted in 2011, his
family and others in his inner circle defrauded the state of between an
estimated US$1 billion to U$2.6 billion over a seven-year period, according
to
a World Bank research report of 2015.
Controlling an estimated one-fifth of all Tunisian business profits, Ben
Ali’s clan is reported to have acquired approximately US$13
billion1 in assets while in power, money that could have
gone towards improving life for Tunisian people.
Investigators have identified reported assets held by Ben Ali’s network,
including a US$1 million yacht seized in Italy2; a
Falcon jet in Switzerland; properties in Paris, the Alps and Côte
d’Azur3; and a US$2.5 million mansion4 in
Montreal.
Despite denying that he had overseas assets5, funds linked
to Ben Ali were frozen in Canada, the EU, UK and Switzerland. The Swiss authorities
are working to return US$40 million to Tunisia stashed there during the Ben
Ali era.
But Ben Ali’s monumental corruption, like the Arab Spring, could slip into
“old history”.
The Tunisian government recently proposed an amnesty from prosecution for the
thousands of corrupt businesspeople and top government officials who
helped Ben Ali in his tenure.
If passed, the Economic Reconciliation Law6 would require
the corrupt to return the money they stole to the Tunisian economy in
exchange for having all charges against them dropped. In addition, they
would be granted immunity from being prosecuted further. No
questions asked. No need to reveal the truth about Ben Ali or others in
testimony. No further public debate. No justice.
Photo: Flickr/thierry ehrmann
Additional sources:
http://m.themalaymailonline.com/malaysia/article/switzerland-to-adopt-new-law-to-return-foreign-funds-stashed-by-erstwhile-l
http://www.transparency.org/news/pressrelease/transparency_international_condemns_tunisian_draft_law_that_would_set_the_c
At one stage earning as little as US$700
a month1, Ukraine’s Viktor Yanukovych seemingly knew how to get
extraordinarily rich.
A golf course, private zoo and full-size Spanish galleon replica were just
some of the attractions at Mezhyhirya, the former president’s estate.
Following Yanukovych’s ouster in
February 2014, after civil unrest sparked deadly conflict claiming close to
80 lives2, visitors have flocked to see the multimillion-dollar
estate3 and its US$100,000 light fixtures4, US$2
million decorative woodwork5 and spa replete with salt
grotto6. Meanwhile, Ukrainians’ per capita GDP was less than
US$4,000 in 2013.
Yanukovych first rented the then-government owned 137-hectare estate when he
became prime minister in 2002. After the 2004 Orange Revolution, Yanukovych
lost his job and Mezhyhirya, but he returned to his post and the estate a
year later. He left his position as prime minister in 2007, but he continued
to live there and the estate was privatised7 in this period
through a series of transactions involving companies apparently controlled
by close associates8.
According to Yanukovych’s 2005 income declaration, he earned less than U$700
per month9. As Prime Minister in 2006, he was said to have earned
around US$5,000 per month – still not enough to live like he did.
How did Yanukovych’s civil servant salary buy him all this? How did
Mezhyhirya end up in private hands?
The answer points to front companies10 which allegedly enabled
Yanukovych and his inner circle to divert untold millions in state
assets.
For starters, a Donetsk trading company acquired Mezhyhirya without a
competitive bidding process11, and subsequently went bankrupt.
Tantalit12, a Ukrainian real estate and construction firm, then
acquired it.
Although the exact corporate relationship remains murky, Tantalit is
apparently controlled by an Austrian firm13 whose accounts
indicate it is owned by a British company14, according to the
Ukrainian activist organization Open Democracy15. Tantalit was
registered under Serhiy Kluyev16, an MP currently under
investigation who fled the country after Parliament lifted his immunity17.
The European Union imposed an entry ban and asset freeze on Kluyev and other
Yanukovych cronies in March 2014 and extended the ban on Kluyev until March
201618.
Mezhuhirya had just one major contractor, AVK, whose ownership was disguised
by proxy19. AVK spent20, including on items unrelated
to Mezhyhirya, such as US$5 million for “media monitoring”, US$25 million
for reports on the housing market, and millions for “services according to
contracts”. It also received millions as “infusions from investors”. AVK
received payments from Tantalit and other companies controlled by
Yanukovych’s “Family”, including Ukrbusinessbank21 reportedly
controlled by Yanukovych’s son22.
Mezhyhirya not only symbolises Yanukovych’s excesses, but also his clumsy
attempt to cover them up23. Yanukovych fled Ukraine in early
2014, but not before he and his henchmen dumped thousands of documents24
recording real estate transactions, millions in payments that have been
questioned25 into the estate’s pond. Journalists26
worked to save and post these, which suggest that Mezhyhirya was just the
beginning of the story27 as other real estate holdings came to
light. Yanukovych has been living a lavish lifestyle in Russia28
without consequences since February 2014.
Photo: Flickr/Israel Ministry of Foreign Affairs/ Moshe Milner
GPO Cropped and desaturated from original
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