The Hindu Business Line : Corruption — here, there, everywhere

Whether it is a democracy or an autocracy, whether it is a rich or a poor country, people in power are tempted to use that clout for personal gain. The US has set up a formalised system of lobbying to regulate this connection between those who make the laws and those affected by them.

The US has also built some innovative approaches to privatise and to provide incentives for hunting the wicked.

There has been a spate of revelations in the last few months of corruption in high paces. Mr George Ryan, former Governor of the State of Illinois, was found guilty of corruption. Congressman Randy Duke Cunningham was sentenced to prison for taking bribes. Mr Jack Abramoff, a highly connected lobbyist, has been accused of bribing senior politicians and he has pleaded guilty to some minor charges to begin with.

There is no need to panic and revise estimates of political risk. When I last checked the Web Site of Transparency International, the US was still listed among the least corrupt nations. I don't think that is in any danger of changing immediately, although TI's surveyors may now be inclined to consider more carefully how they choose their respondent base in the future.

Corrupt politicians

Let's get back to the corruption stories. Governor Ryan was the toast of liberals in the country a few years ago when he courageously put a moratorium on death penalty in his state. Republicans are usually in favour of death penalty and by breaking rank he showed conviction and courage. He felt that the capital punishment system was iniquitous and commuted over 160 death sentences after seeing evidence that there were cases of people who had received capital punishment but were later found innocent.

But Mr Ryan was also diverting contracts and state business to friends in return for cash, paid vacations, and so on. Seventy-nine other state workers and businessmen have been charged in the case. The case took eight years before he was found guilty on April 17. Ryan, 72,may get a jail sentence. He claims innocence and has said he would appeal. Another Governor, Mr John Rowland of Connecticut, was also found guilty of receiving gifts from state contractors not too long ago.

In March, Mr Randy `Duke' Cunningham, a former Congressman (that is, equivalent to a Member of Parliament) from California, admitted taking $2.4 million (Rs 10.8 crore) bribefrom defence contractors and evading $1million (Rs 4.5 crore) in taxes. He was sentenced to eight years in prison.

The Jack Abramoff scandal made the headlines in January and is still unravelling. Mr Abramoff, a lobbyist, has pleaded guilty to taking money for lobbying services that were to be passed on to associates but also included a kickback for himself.

What is more interesting is that he is cooperating with the investigation and could implicate about 60 lawmakers. These include Mr Tom Delay, the Republican leader in the Senate who quit his post and has since said he would not run for office again.

The details of Abramoff's activities show that he was quite generous in arranging free trips and lunches for parliamentarians in return for helping his clients.

Corruption in public office

It is not just the politicians who have been caught with their fingers in the cookie jar. Public officials have not been far behind. Iraq, apart from being an ongoing battlefield, has also been an ongoing business boom. The chaos has provided several opportunities for US businesses. Billions of dollars are being handed out for activities that include procurement of supplies for the US forces, reconstruction of damaged infrastructure, and contracts for providing security.

On the pretext that the decisions have to be made quickly, many of the usual procurement rules, such as calling for multiple bids and prior scrutiny, have been suspended. Even when multiple bids are required, US officials in Iraq are reported to connive with known suppliers by asking them to provide dummy bids just to satisfy the rules. Government auditors have found evidence of money spent without proper authorisation, sums of money that are unaccounted and payments made to firms charging unreasonably high prices. Following investigations, which have revealed corruption, various US government agencies have been actively pursuing contractors and officials in cahoots who have stolen money from the US government.

However, the irony is that the Iraq government has no recourse to recover money from the US companies that it has been defrauded of. This is because just before the US-run Coalition Provisional Authority handed over charge to the Iraq Government in June 2004, it created a law giving American contractors immunity from prosecution in Iraq. This had resulted in Iraq becoming what one official has called a `free-fraud' zone. The US Congress set up a Special Inspector General for Iraq Reconstruction, which has found some shocking information that rivals the UN oil-for-food scandal wherein many around the world had set up a kickback scheme with the Saddam Hussein regime. For example, the auditors have found that out of 198 separate contracts handed out, there was no evidence of goods and services received for 154. Some contractors were paid twice for the same work and many paid for work not done. Of the approximately $1.5 billion (Rs 6,750 crore) given to banks in Iraq for government operating expenses, only 33 per cent can be accounted for. We should not forget here that at the time of occupation, the US took charge of about $20.7 billion (Rs 93,150 crore) of Iraq's oil revenues and the money in Iraq's accounts, supposedly for use in Iraq's reconstruction.

One may be flabbergasted by this revelation and wonder if this is the case in the US, how bad it must be in countries rated `very corrupt'. That is a fair assessment. Although the average policeman or tax official may not extend his hand for looking the other way, human greed in high places and among the powerful cannot be banished easily. The national per capita income of $41,000 (Rs 18.5 lakh) allows the lower level officials to adhere to moral standards with relative ease. But the powerful can apparently afford to be immoral.

Unlike most developing countries that have achieved independence in the last 50 years or so and are just getting used to the taste of indigenous power, the US has had more than a couple of hundred years to build its democratic politics. Its parliamentarians and governors are paid quite well and strict rules have been laid down. That did not stop them from stretching their hands into people's pocket while misusing their position.

Power for personal gains

Let's face it. Whether it is a democracy or an autocracy, whether it is a rich or a poor country, people in power are tempted to use that clout for personal gain. The US has set up a formalised system of lobbying to regulate this connection between those who make the laws and those affected by them.

All lobbyists have to register themselves, and there are elaborate rules of what can be given free, how much money can be donated as political contributions and so on. Butfor every rule, there is a loophole. And for those lawmakers who want to keep the action in-house, several of them, reportedly, have their own spouses and children registered as lobbyists!

The US has also built innovative approaches to privatise and provide incentives for hunting the wicked. The False Claims Act for example, allows private individuals having information about fraud to sue those suspected of defrauding the government. The government has the option of joining the suit or not. If the individual wins the case, the whistle-blower status allows the individual to retain 30 per cent of the penalty.

(The author is professor International Business and Strategic Management at Suffolk University, Boston, US. Feedback can be sent to cgopinath@Suffolk.edu)

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