Corruption could undermine the integrity of SA’s legal profession

13Jan 2020
The Guardian
Corruption could undermine the integrity of SA’s legal profession

If perpetrators of corruption are not held accountable and they continue to act with impunity, South Africa will soon be joining the ranks of countries like Somalia and Syria, which have the worst human rights records.

By  Omphemetse S Sibanda  

It was pleasing to me as an ordinary citizen to read in November 2019 the writing by Peter Hain, who said, “While the NPA begins rolling out prosecutions over State Capture, it is worth looking at ways to recover stolen loot to help plug the huge gap in public finances created by corruption”.

The UN General Assembly’s Transforming our world: the 2030 Agenda for Sustainable Development of 2015 requires states to “substantially reduce corruption and bribery in all their forms” by 2030. Let me state from the outset that the UN here espouses what may be regarded as a human rights-based approach to corruption, which as noted by Cecily Rose has its limitations [See Rose, The Limitations of a Human Rights Approach to Corruption, 65 International and Comparative Law Quarterly (2016) 405, at 417].

South Africa is a classic example of how corruption and other corrupt activities impede the achievement of human development and the promotion of human rights in general. Such corrupt activities are at the centre of the consistent lower ranking of South Africa on Transparency International’s Corruption Perceptions Index. If perpetrators of corruption are not held accountable and continue to act with impunity, South Africa will soon be joining the ranks of countries like Somalia and Syria with the worst human rights record.

In addition to the view by Hain, legal practitioners must also be held accountable for their corruption and corrupt activities in the same way we need to have global banks, and corporates being held accountable. First, just like the judiciary, which must be held accountable, legal practitioners play a major role in society. Second, as a society, we expect legal practitioners to be immune to corruption. Third, reports over the years, including revelations relating to State Capture, suggests that legal practice corruption and money-laundering may be a significant problem in South Africa. Legal practice may wittingly or unwittingly have contributed to State Capture. Fourth, corruption takes many forms and nuances within a legal practice. Client-lawyer privilege can be abused by legal practitioners as a cloak to perpetrate corruption. So too are trust accounts used by legal practitioners to launder corruptly received money.

As noted by Hamman and Koen [Cave Pecuniam: Lawyers as Launderers 2012 Potchefstroom Electronic Law Journal 69], “the attorney’s trust account, which was conceived as the beacon of unblemished lawyering integrity, becomes the vehicle of squalid criminality”. Legal practitioners acting as intermediaries in government business provide a fertile ground for corruption. Outsourcing of legal briefs makes it easy for corrupt practices to fester. Generally, the receiving of gifts, palm greasing, the granting of favours, and other actions by or involving legal practitioners can create the appearance of corruption.

The need for accountability, a commitment to fighting corruption and integrity of the legal practise in South Africa can never be over-emphasised. The four core principles that guide legal practice and accountability are: professional integrity, independence, client-lawyer confidentiality and avoidance of conflicts of interest. Legal practitioners should know and/or ought to know that corruption and related activities risk undermining the integrity of the legal profession.

Yet there is no shortage of reports and many instances of corruption and/or related acts of criminality and misconduct by legal practitioners. Consider, for example, media headlines such as: “State Capture: Top law firm linked to Transnet ‘bribery’ scandal”. Some legal practitioners and legal scholars may want to insist that criminal wrongdoings in their profession are not rife. The irrefutable reality is that what was once called a noble profession is no longer as innocent and noble as we would like it to be known for.

Indications are that the legal profession has lost some parts of its ethical and moral compass. The thinking is now prominently about financial gain and wealth. Law and justice are no longer a key consideration for some legal practitioners. Put simply, the articulation by legal practitioners of law, justice, due process, social justice, ethics, accountability and integrity of the legal practice is steadily diminishing.

A typical example is a case heard in the High Court in Grahamstown, that involved a claim by one Zama Mfengwana against the Road Accident Fund [See Mfengwana v Road Accident Fund (1753/2015) [2016] ZAECGHC 159; 2017 (5) SA 445 (ECG) (15 December 2016)]. In this case, the contingency fee agreement between Mfengwana and the attorney was found to be unconscionable and abusive; an over-reaching agreement by the attorney. Reading the judgment and the learned judge’s observations on the agreement I was reminded of a quotation attributed to Henry Peter Brougham, an English politician who said that, “A lawyer is a learned gentleman who rescues your estate from your enemies and keeps it himself.”

In the Mfengwana v Road Accident Fund case, Judge Clive Plasket said: “[27] This is yet another case in which an attorney – an officer of the court who is supposed to act with integrity and comply with the highest ethical standards – is guilty of an attempt to grossly overreach his client or rapacious and unconscionable conduct. Unfortunately, in this jurisdiction, this is a problem that is all too common. That said, however, it seems to me that the problems in relation to contingency fee agreements that come to the attention of the courts are, in all likelihood, but the tip of the iceberg.”

Also important to note is that Plasket noted with concern the prevalence of corruption in the legal practice, and implored the Legal Practice Council (hereinafter LPC) to act accordingly. Having perused the contingency fee agreement, the judge said: “[29] This is all cause for grave concern and, if I am correct, a manifestation of endemic corruption embedded in the attorneys’ profession. For this reason, I intend requesting the Registrar of this court to deliver a copy of this judgment to the Cape Law Society so that it, as custodian of the ethical standards of the profession in the public interest, may consider ways and means of stopping the rot.

“It is the duty of the LPC in terms of section 5(b) of the Legal Practice Act, for instance, to ‘ensure that fees charged by legal practitioners for legal services rendered are reasonable and promote access to legal services, thereby enhancing access to justice.’ The LPC also has a duty in terms of section 5(g) of the Act to ‘determine, enhance and maintain appropriate standards of professional practice and ethical conduct of all legal practitioners and all candidate legal practitioners.’ ”

In her acceptance speech on 4 February 2018 as the new National Director of Public Prosecutions (NDPP), Shamila Batohi committed the NPA to ensuring accountability for corruption activities. She famously stated: “We in the NPA have important work to do, which includes devoting our efforts to holding accountable those who have corrupted our institutions, who have betrayed the public good and the values of our Constitution for private gain, especially those in the most privileged positions of government and corporate power.”

Noteworthy is that Batohi reminded members of the NPA that they are lawyers and that society has lost trust in lawyers, which needs to be restored. The speech was preceded by her media presentation on 1 February 2018 where she proclaimed the following famous warning:

“Perpetrators of corruption and crime within the state and private sector – regardless of who you are, how rich you are and what position you hold – your days of acting with impunity are numbered.”

The same hardline message against corruption was carried by President Cyril Ramaphosa in his 7 February 2019 State of the Nation Address. The president expressed excitement at the appointment of Batohi as the person who will, “lead the revival of the NPA and to strengthen our fight against crime and corruption”.

One hopes that 2020 will be the start of us seeing the fruits of having revived the NPA and having initiated the many commissions on corruption, maladministration and mismanagement. Institutions like the NPA must shift their gears from less talk and promises to action and consequences. A clear example must be set that we are a society and country committed to zero tolerance of corruption. Law firms and individual legal practitioners who are suspected of corruption must be investigated and prosecuted.

So far, the question relating to what point the revelations at the Zondo Commission should be followed by the NPA has not been fully addressed. But there is no such need because the institution of the commission did not suspend the mandate of the NPA. Furthermore, the prosecutorial activities of those appearing before the commission are not contingent on the outcomes and report of the NPA. The NPA still has its exclusive authority and prosecutorial independence. The paucity of the clear and loud voice of our LPC and law societies against alleged corruption by law firms and legal practitioners is deafening. In my view, the LPC and the different law societies must play a visible role as the primary enforcers of integrity in the legal provision. These institutions must publicly condemn corruption by legal practitioners as an unforgivable act of misconduct that legal practitioners must be held accountable for.

The Legal Practice Act 14 of 2014 seeks among other things to, “ensure the accountability of the legal profession to the public”. Relating to processes of both the NPA and the LPC respectively, the allegations of corruption that lead to negative findings against law firms and legal practitioners must be met with appropriate sanctions, and remedies. For example, not only should a law firm be blacklisted for doing work with the government; individuals involved should carry the blacklisting no matter where they go. This would mean that a lawyer who leaves firm A for firm B under the cloud of corruption allegations will extend the blacklisting to firm B. The benefit of this approach is that individuals will not be able to cleanse their corruption shadow by joining new firms or opening new firms.

These two sentences from the preamble of the Code of Professional Ethics adopted by the American Bar Association in 1808, which I regard as resonating with our legal profession, should be restated by the LPC at every opportunity available: “The future of our republic, to a great extent, depends upon our maintenance of justice pure and unsullied. It cannot be so maintained unless the conduct and motives of the members of our profession are such as to merit the approval of all just men.”

Professor Dr Omphemetse S Sibanda is a Professor of Law at the Faculty of Management and Law at the University of Limpopo. He is a former employee of Unisa and worked for Unisa College of Law for 16 years since 2002. He holds a Doctor of Laws (in International Economic Law), studied at the North West University, a Master of Laws from Georgetown University Law Centre, United States; LLB (Hon) and B Juris from the then Vista University, Soweto Campus.

Corruption is a form of dishonesty or criminal offense undertaken by a person or organiSation entrusted with a position of authority, to acquire illicit benefit or abuse power for one's private gain. Corruption may include many activities including bribery and embezzlement, though it may also involve practices that are legal in many countries.  Political corruption occurs when an office-holder or other governmental employee acts in an official capacity for personal gain. Corruption is most commonplace in kleptocracies, oligarchies, narco-states and mafia states

Corruption can occur on different scales. Corruption ranges from small favors between a small number of people (petty corruption),  to corruption that affects the government on a large scale (grand corruption), and corruption that is so prevalent that it is part of the everyday structure of society, including corruption as one of the symptoms of organized crime. Corruption and crime are endemic sociological occurrences which appear with regular frequency in virtually all countries on a global scale in varying degree and proportion. Individual nations each allocate domestic resources for the control and regulation of corruption and crime. Strategies to counter corruption are often summarized under the umbrella term anti-corruption.

Stephen D. Morris,[3] a professor of politics, wrote that political corruption is the illegitimate use of public power to benefit a private interest. Economist Ian Senior defined corruption as an action to (a) secretly provide (b) a good or a service to a third party (c) so that he or she can influence certain actions which (d) benefit the corrupt, a third party, or both (e) in which the corrupt agent has authority.  World Bank economist Daniel Kaufmann,  extended the concept to include "legal corruption" in which power is abused within the confines of the law—as those with power often have the ability to make laws for their protection. The effect of corruption in infrastructure is to increase costs and construction time, lower the quality and decrease the benefit.  

Corruption can occur on different scales. Corruption ranges from small favors between a small number of people (petty corruption),  to corruption that affects the government on a large scale (grand corruption), and corruption that is so prevalent that it is part of the everyday structure of society, including corruption as one of the symptoms of organized crime.

A number of indicators and tools have been developed which can measure different forms of corruption with increasing accuracy.  

Petty corruption

Petty corruption occurs at a smaller scale and takes place at the implementation end of public services when public officials meet the public. For example, in many small places such as registration offices, police stations, state licensing boards,  and many other private and government sectors.

Grand corruption

Grand corruption is defined as corruption occurring at the highest levels of government in a way that requires significant subversion of the political, legal and economic systems. Such corruption is commonly found in countries with authoritarian or dictatorial governments but also in those without adequate policing of corruption.  

The government system in many countries is divided into the legislative, executive and judicial branches in an attempt to provide independent services that are less subject to grand corruption due to their independence from one another.  

Systemic corruption

Systemic corruption (or endemic corruption)  is corruption which is primarily due to the weaknesses of an organization or process. It can be contrasted with individual officials or agents who act corruptly within the system.

Factors which encourage systemic corruption include conflicting incentives, discretionary powers; monopolistic powers; lack of transparency; low pay; and a culture of impunity.  Specific acts of corruption include "bribery, extortion, and embezzlement" in a system where "corruption becomes the rule rather than the exception."  Scholars distinguish between centralized and decentralized systemic corruption, depending on which level of state or government corruption takes place; in countries such as the Post-Soviet states both types occur.[16] Some scholars argue that there is a negative duty[clarification needed] of western governments to protect against systematic corruption of underdeveloped governments.[17][18]

Corruption has been a major issue in China, where society depends heavily on personal relationships. By the late 20th century that combined with the new lust for wealth, produced escalating corruption. Historian Keith Schoppa says that bribery was only one of the tools of Chinese corruption, which also included, "embezzlement, nepotism, smuggling, extortion, cronyism, kickbacks, deception, fraud, squandering public monies, illegal business transactions, stock manipulation and real estate fraud." Given the repeated anti-corruption campaigns it was a prudent precaution to move as much of the fraudulent money as possible overseas.   

According to a 2017 survey study, the following factors have been attributed as causes of corruption:  

  • Greed of money, desires.
  • Higher levels of market and political monopolization
  • Low levels of democracy, weak civil participation and low political transparency
  • Higher levels of bureaucracy and inefficient administrative structures
  • Low press freedom
  • Low economic freedom
  • Large ethnic divisions and high levels of in-group favoritism
  • Gender inequality
  • Resource wealth
  • Poverty
  • Political instability
  • Weak property rights
  • Contagion from corrupt neighboring countries
  • Low levels of education
  • Lack of commitment to the society.
  • Extravagant Family.

It has been noted that in a comparison of the most corrupt with the least corrupt countries, the former group contains nations with huge socio-economic inequalities, and the latter contains nations with a high degree of social and economic justice. [24]

In different sectors

Corruption can occur in many sectors, whether they be public or private industry or even NGOs (especially in public sector). However, only in democratically controlled institutions is there an interest of the public (owner) to develop internal mechanisms to fight active or passive corruption, whereas in private industry as well as in NGOs there is no public control. Therefore, the owners' investors' or sponsors' profits are largely decisive.

Government/public sector

Public corruption includes corruption of the political process and of government agencies such as the police as well as corruption in processes of allocating public funds for contracts, grants, and hiring. Recent research by the World Bank suggests that who makes policy decisions (elected officials or bureaucrats) can be critical in determining the level of corruption because of the incentives different policy-makers face.

Within the political system

Political corruption is the abuse of public power, office, or resources by elected government officials for personal gain, by extortion, soliciting or offering bribes. It can also take the form of office holders maintaining themselves in office by purchasing votes by enacting laws which use taxpayers' money.[26] Evidence suggests that corruption can have political consequences- with citizens being asked for bribes becoming less likely to identify with their country or region.  

The political act of graft (American English), is a well known and now global form of political corruption, being the unscrupulous and illegal use of a politician's authority for personal gain, when funds intended for public projects are intentionally misdirected in order to maximize the benefits to illegally private interests of the corrupted individual(s) and their cronies.

Various sources acclaim the Spanish People's Party – Partido Popular -, to be Europe's most corrupt party, with about yearly 45 billion euro worth of corruption.  

 Police corruption is a specific form of police misconduct designed to obtain financial benefits, personal gain, career advancement for a police officer or officers in exchange for not pursuing or selectively pursuing an investigation or arrest or aspects of the "thin blue line" itself where force members collude in lies to protect other members from accountability. One common form of police corruption is soliciting or accepting bribes in exchange for not reporting organized drug or prostitution rings or other illegal activities.

Another example is police officers flouting the police code of conduct in order to secure convictions of suspects—for example, through the use of falsified evidence. More rarely, police officers may deliberately and systematically participate in organized crime themselves. In most major cities, there are internal affairs sections to investigate suspected police corruption or misconduct. Similar entities include the British Independent Police Complaints Commission.

In the judicial system

Judicial corruption refers to corruption-related misconduct of judges, through receiving or giving bribes, improper sentencing of convicted criminals, bias in the hearing and judgement of arguments and other such misconduct.

Governmental corruption of judiciary is broadly known in many transitional and developing countries because the budget is almost completely controlled by the executive. The latter undermines the separation of powers, as it creates a critical financial dependence of the judiciary. The proper national wealth distribution including the government spending on the judiciary is subject to the constitutional economics.

It is important to distinguish between the two methods of corruption of the judiciary: the government (through budget planning and various privileges), and the private.[31] Judicial corruption can be difficult to completely eradicate, even in developed countries.  Corruption in judiciary also involves the government in power using the judicial arm of government to oppress the opposition parties in the detriments of the state.

In healthcare

Corruption, the abuse of entrusted power for private gain, as defined by Transparency International  is systemic in the health sector. The characteristics of health systems with their concentrated supply of a service, high discretionary power of its members controlling the supply, and low accountability to others are the exact constellation of the variables described by Klitgaard, on which corruption depends.  

Corruption in health care is more dangerous than in any other sector, because it affects health outcomes and is literally deadly.  It is widespread and yet, little has been published in medical journals about this topic and as of 2019 there is no evidence on what might reduce corruption in the health sector.  Corruption occurs within the private and public health sectors and may appear as theft, embezzlement, nepotism, bribery up till extortion, or as undue influence.  and occurs anywhere within the sector, be it in service provision, purchasing, construction and hiring. In 2019, Transparency International has described the 6 most common ways of service corruption as follows: absenteeism, informal payments from patients, embezzlement, inflating services and the costs of services, favouritism and manipulation of data (billing for goods and services that were never sent or done).  

In the education system

Corruption in education is a worldwide phenomenon. Corruption in admissions to universities is traditionally considered as one of the most corrupt areas of the education sector.  Recent attempts in some countries, such as Russia and Ukraine, to curb corruption in admissions through the abolition of university entrance examinations and introduction of standardized computer-graded tests have largely failed. Vouchers for university entrants have never materialized.  The cost of corruption is in that it impedes sustainable economic growth.  

Endemic corruption in educational institutions leads to the formation of sustainable corrupt hierarchies.  While higher education in Russia is distinct with widespread bribery, corruption in the US and the UK features a significant amount of fraud.  The US is distinct with grey areas and institutional corruption in the higher education sector.  Authoritarian regimes, including those in the former Soviet republics, encourage educational corruption and control universities, especially during the election campaigns.  This is typical for Russia, Ukraine,  and Central Asian regimes,  among others. The general public is well aware of the high level of corruption in colleges and universities, including thanks to the media.  Doctoral education is no exception, with dissertations and doctoral degrees available for sale, including for politicians.  Russian Parliament is notorious for "highly educated" MPs  High levels of corruption are a result of universities not being able to break away from their Stalinist past, over bureaucratization,  and a clear lack of university autonomy.  Both quantitative and qualitative methodologies are employed to study education corruption,[58] but the topic remains largely unattended by the scholars. In many societies and international organizations, education corruption remains a taboo. In some countries, such as certain eastern European countries, some Balkan countries and certain Asian countries, corruption occurs frequently in universities.  This can include bribes to bypass bureaucratic procedures and bribing faculty for a grade.  The willingness to engage in corruption such as accepting bribe money in exchange for grades decreases if individuals perceive such behavior as very objectionable, i.e. a violation of social norms and if they fear sanctions regarding the severity and probability of sanctions.  

Within labor unions

The Teamsters (International Brotherhood of Teamsters) is an example of how the civil RICO process can be used. For decades, the Teamsters had been substantially controlled by La Cosa Nostra. Since 1957, four of eight Teamster presidents were indicted, yet the union continued to be controlled by organized crime elements. The federal government has been successful at removing the criminal influence from this 1.4 million-member union by using the civil process.  

In religion

The history of religion includes numerous examples of religious leaders calling attention to corruption in the religious practices and institutions of their time. Jewish prophets Isaiah and Amos berate the rabbinical establishment of Ancient Judea for failing to live up to the ideals of the Torah.  In the New Testament, Jesus accuses the rabbinical establishment of his time of hypocritically following only the ceremonial parts of the Torah and neglecting the more important elements of justice, mercy and faithfulness.  Corruption was one of the important issues during the Investiture Controversy. In 1517, Martin Luther accuses the Catholic Church of widespread corruption, including selling of indulgences.  

In 2015, Princeton University professor Kevin M. Kruse advances the thesis that business leaders in the 1930s and 1940s collaborated with clergymen, including James W. Fifield Jr., to develop and promote a new hermeneutical approach to Scripture that would de-emphasize the social Gospel and emphasize themes, such as individual salvation, more congenial to free enterprise.  

Business leaders, of course, had long been working to "merchandise" themselves through the appropriation of religion. In organizations such as Spiritual Mobilization, the prayer breakfast groups, and the Freedoms Foundation, they had linked capitalism and Christianity and, at the same time, likened the welfare state to godless paganism.

In philosophy

19th century German philosopher Arthur Schopenhauer acknowledged that academics, including philosophers, are subject to the same sources of corruption as the society they inhabit. He distinguished the corrupt "university" philosophers, whose "real concern is to earn with credit an honest livelihood for themselves and ... to enjoy a certain prestige in the eyes of the public"  from the genuine philosopher, whose sole motive is to discover and bear witness to the truth.

To be a philosopher, that is to say, a lover of wisdom (for wisdom is nothing but truth), it is not enough for a man to love truth, in so far as it is compatible with his own interest, with the will of his superiors, with the dogmas of the church, or with the prejudices and tastes of his contemporaries; so long as he rests content with this position, he is only   [lover of self], not a  lover of wisdom]. For this title of honor is well and wisely conceived precisely by its stating that one should love the truth earnestly and with one’s whole heart, and thus unconditionally and unreservedly, above all else, and, if need be, in defiance of all else. Now the reason for this is the one previously stated that the intellect has become free, and in this state, it does not even know or understand any other interest than that of truth.[68]

Corporate corruption

In criminology, corporate crime refers to crimes committed either by a corporation (i.e., a business entity having a separate legal personality from the natural persons that manage its activities), or by individuals acting on behalf of a corporation or other business entity (see vicarious liability and corporate liability). Some negative behaviours by corporations may not be criminal; laws vary between jurisdictions. For example, some jurisdictions allow insider trading.

Further information: Operation Car Wash

Petróleo Brasileiro S.A. — Petrobras, more commonly known as simply Petrobras (Portuguese pronunciation: [ˌpɛtɾoˈbɾas]), is a semi-public Brazilian multinational corporation in the petroleum industry headquartered in Rio de Janeiro, Brazil. The company's name translates to Brazilian Petroleum Corporation — Petrobras. The company was ranked #58 in the 2016 Fortune Global 500 list.[69] It is being investigated over corporate and political collusion and corruption.[70]

Odebrecht is a privately held Brazilian conglomerate consisting of businesses in the fields of engineering, real estate, construction, chemicals and petrochemicals. The company was founded in 1944 in Salvador da Bahia by Norberto Odebrecht, and the firm is now present in South America, Central America, North America, the Caribbean, Africa, Europe and the Middle East. Its leading company is Norberto Odebrecht Construtora    Odebrecht is one of the 25 largest international construction companies and led by Odebrecht family.

In 2016, the firm's executives were examined during Operation Car Wash part of an investigation over Odebrecht Organization bribes to executives of Petrobras, in exchange for contracts and influence.  Operation Car Wash is an ongoing criminal money laundering and bribes related corporate crime investigation being carried out by the Federal Police of Brazil, Curitiba Branch, and judicially commanded by Judge Sérgio Moro since 17 March 2014.  

Arms for cash

"Arms for cash" can be done by either a state-sanctioned arms dealer, firm or state itself to another party it just in regards regards as only a good business partner and not political kindred or allies, thus making them no better than regular gun runners. Arms smugglers, who are already into arms trafficking may work for them on the ground or with shipment. The money is often laundered and records are often destroyed. [77] It often breaks UN, national or international law.[77] Payment can also be in strange or indirect ways like arms paid for in post-war oil contracts, post-war hotel ownership, conflict diamonds, corporate shares or the long term post-war promises of superfus  future contracts between the parties involved in it, etc...

In 2006 Transparency International ranked Angola a lowly 142 out of 163 countries in the Corruption Perception Index just after Venezuela and before the Republic of the Congo with a 2.2 rating.  Angola was at 168th place (out of 178 countries) on Transparency International’s Corruption Perceptions Index (CPI), receiving a 1.9 on a scale from 0 to 10.  On the World Bank's 2009 Worldwide Governance Index, Angola had done very poorly on all six aspects of governance assessed. While its score for political stability improved to 35.8 in 2009 (on a 100-point scale) from 19.2 in 2004, Angola earned especially low scores for accountability, regulatory standards, and rule of law. The score for corruption declined from an extremely low 6.3 in 2004 to 5.2 in 2009.  

The country is regarded poorly and that corruption is wounding the economy badly despite the emerging oil industries wealth.[81]

The Mitterrand–Pasqua affair, also known informally as Angolagate, was an international political scandal over the secret and illegal sale and shipment of arms from the nations of Central Europe to the government of Angola by the Government of France in the 1990s. It led to arrests and judiciary actions in the 2000s, involved an illegal arms sale to Angola despite a UN embargo, with business interests in France and elsewhere improperly obtaining a share of Angolan oil revenues. The scandal has subsequently been tied to several prominent figures in French politics.  

42 individuals, including: 42 people, including Jean-Christophe Mitterrand, Jacques Attali, Charles Pasqua and Jean-Charles Marchiani, Pierre Falcone. Arcadi Gaydamak, Paul-Loup Sulitzer, Union for a Popular Movement deputy Georges Fenech, Philippe Courroye [fr] the son of François Mitterrand and a former French Minister of the Interior, were charged, accused, indicted or convicted with illegal arms trading, tax fraud, embezzlement, money laundering and other crimes.  

Methods

In systemic corruption and grand corruption, multiple methods of corruption are used concurrently with similar aims.[85]

Bribery

 Bribery involves the improper use of gifts and favours in exchange for personal gain. This is also known as kickbacks or, in the Middle East, as baksheesh. It is a common form of corruption. The types of favours given are diverse and may include money, gifts, sexual favours, company shares, entertainment, employment and political benefits. The personal gain that is given can be anything from actively giving preferential treatment to having an indiscretion or crime overlooked.[86]

Bribery can sometimes form a part of the systemic use of corruption for other ends, for example to perpetrate further corruption. Bribery can make officials more susceptible to blackmail or to extortion.

Embezzlement, theft and fraud

Embezzlement and theft involve someone with access to funds or assets illegally taking control of them. Fraud involves using deception to convince the owner of funds or assets to give them up to an unauthorized party.

Examples include the misdirection of company funds into "shadow companies" (and then into the pockets of corrupt employees), the skimming of foreign aid money, scams and other corrupt activity.

Graft

The political act of graft is when funds intended for public projects are intentionally misdirected to maximize the benefits to private interests of the corrupt individuals.

Extortion and blackmail

While bribery is the use of positive inducements for corrupt aims, extortion and blackmail centre around the use of threats. This can be the threat of violence or false imprisonment as well as exposure of an individual's secrets or prior crimes.

This includes such behavior as an influential person threatening to go to the media if they do not receive speedy medical treatment (at the expense of other patients), threatening a public official with exposure of their secrets if they do not vote in a particular manner, or demanding money in exchange for continued secrecy.

Influence peddling

Influence peddling is the illegal practice of using one's influence in government or connections with persons in authority to obtain favors or preferential treatment, usually in return for payment.

Networking can be an effective way for job-seekers to gain a competitive edge over others in the job-market. The idea is to cultivate personal relationships with prospective employers, selection panelists, and others, in the hope that these personal affections will influence future hiring decisions. This form of networking has been described as an attempt to corrupt formal hiring processes, where all candidates are given an equal opportunity to demonstrate their merits to selectors. The networker is accused of seeking non-meritocratic advantage over other candidates; advantage that is based on personal fondness rather than on any objective appraisal of which candidate is most qualified for the position.  

 Abuse of discretion refers to the misuse of one's powers and decision-making facilities. Examples include a judge improperly dismissing a criminal case or a customs official using their discretion to allow a banned substance through a port.

Favoritism, nepotism and clientelism

 Favouritism, nepotism and clientelism involve the favouring of not the perpetrator of corruption but someone related to them, such as a friend, family member or member of an association. Examples would include hiring or promoting a family member or staff member to a role they are not qualified for, who belongs to the same political party as you, regardless of merit.  

Some states do not forbid these forms of corruption.[  

Relationship to economic growth

Corruption is strongly negatively associated with the share of private investment and, hence, it lowers the rate of economic growth.  

Corruption reduces the returns of productive activities. If the returns to production fall faster than the returns to corruption and rent-seeking activities, resources will flow from productive activities to corruption activities over time. This will result in a lower stock of producible inputs like human capital in corrupted countries.  

Corruption creates the opportunity for increased inequality, reduces the return of productive activities, and, hence, makes rentseeking and corruption activities more attractive. This opportunity for increased inequality not only generates psychological frustration to the underprivileged but also reduces productivity growth, investment, and job opportunities.  

Prevention

According to the amended Klitgaard equation,  limitation of monopoly and regulator discretion of individuals and a high degree of transparency through independent oversight by non-governmental organisations (NGOs) and the media plus public access to reliable information could reduce the problem. Djankov and other researchers[91] have independently addressed the role information plays in fighting corruption with evidence from both developing and developed countries. Disclosing financial information of government officials to the public is associated with improving institutional accountability and eliminating misbehavior such as vote buying. The effect is specifically remarkable when the disclosures concern politicians’ income sources, liabilities and asset level instead of just income level. Any extrinsic aspects that might reduce morality should be eliminated. Additionally, a country should establish a culture of ethical conduct in society with the government setting the good example in order to enhance the intrinsic morality.

In 1969,[a] Christian anarchist Dorothy Day argued that God will resolve economic abuses such as corruption. She wrote,

Fortunately, the Papal States were wrested from the Church in the last century, but there is still the problem of investment of papal funds. It is always a cheering thought to me that if we have good will and are still unable to find remedies for the economic abuses of our time, in our family, our parish, and the mighty church as a whole, God will take matters in hand and do the job for us.

Enhancing Civil Society Participation

Creating bottom-up mechanisms, promoting citizens participation and encouraging the values of integrity, accountability, and transparency are crucial components of fighting corruption. As of 2012, the implementation of the “Advocacy and Legal Advice Centres (ALACs)” in Europe had led to a significant increase in the number of citizen complaints against acts of corruption received and documented[93] and also to the development of strategies for good governance by involving citizens willing to fight against corruption.[94]

Anti-corruption programmes

 The Foreign Corrupt Practices Act (FCPA, USA 1977) was an early paradigmatic law for many western countries i.e. industrial countries of the OECD. There, for the first time the old principal-agent approach was moved back where mainly the victim (a society, private or public) and a passive corrupt member (an individual) were considered, whereas the active corrupt part was not in the focus of legal prosecution. Unprecedented, the law of an industrial country directly condemned active corruption, particularly in international business transactions, which was at that time in contradiction to anti-bribery activities of the World Bank and its spin-off organization Transparency International.

As early as 1989 the OECD had established an ad hoc Working Group in order to explore "...the concepts fundamental to the offense of corruption, and the exercise of national jurisdiction over offenses committed wholly or partially abroad."[95] Based on the FCPA concept, the Working Group presented in 1994 the then "OECD Anti-Bribery Recommendation" as precursor for the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions  which was signed in 1997 by all member countries and came finally into force in 1999. However, because of ongoing concealed corruption in international transactions several instruments of Country Monitoring  have been developed since then by the OECD in order to foster and evaluate related national activities in combating foreign corrupt practices. One survey shows that after the implementation of heightened review of multinational firms under the convention in 2010 firms from countries that had signed the convention were less likely to use bribery.  

In 2013, a document  produced by the economic and private sector professional evidence and applied knowledge services help-desk discusses some of the existing practices on anti-corruption. They found:

  • The theories behind the fight against corruption are moving from a Principal agent approach to a collective action problem. Principal-agent theories seem not to be suitable to target systemic corruption.
  • The role of multilateral institutions has been crucial in the fight against corruption. UNCAC provides a common guideline for countries around the world. Both Transparency International and the World Bank provide assistance to national governments in term of diagnostic and design of anti-corruption policies.
  • The use of anti-corruption agencies have proliferated in recent years after the signing of UNCAC. They found no convincing evidence on the extent of their contribution, or the best way to structure them.
  • Traditionally anti-corruption policies have been based on success experiences and common sense. In recent years there has been an effort to provide a more systematic evaluation of the effectiveness of anti-corruption policies. They found that this literature is still in its infancy.
  • Anti-corruption policies that may be in general recommended to developing countries may not be suitable for post-conflict countries. Anti-corruption policies in fragile states have to be carefully tailored.
  • Anti-corruption policies can improve the business environment. There is evidence that lower corruption may facilitate doing business and improve firm’s productivity. Rwanda in the last decade has made tremendous progress in improving governance and the business environment providing a model to follow for post-conflict countries.

 

In some countries people travel to corruption hot spots or a specialist tour company takes them on corruption city tours, as it is the case in Prague.  Corruption tours have also occurred in Chicago,[104] and Mexico City  

"Legal corruption"

Though corruption is often viewed as illegal, a concept of legal corruption has been described by Daniel Kaufmann and Pedro Vicente.  It might be termed as processes which are corrupt, but are protected by a legal (that is, specifically permitted, or at least not proscribed by law) framework.  

Examples of legal corruption

In 1994, the German Parliamentary Financial Commission in Bonn presented a comparative study on "legal corruption" in industrialized OECD countries  They reported that in most industrial countries foreign corruption was legal, and that their foreign corrupt practices ranged from simple legalization, through governmental subsidization (tax deduction), up to extreme cases as in Germany, where foreign corruption was fostered, whereas domestic was legally prosecuted. The German Parliamentary Financial Commission rejected a Parliamentary Proposal by the opposition, which had been aiming to limit German foreign corruption on the basis of the US Foreign Corrupt Practices Act (FCPA from 1977), thus fostering national export corporations.  In 1997 a corresponding OECD Anti-Bribery Convention was signed by its members.[111][112] It took until 1999, after the OECD Anti-Bribery Convention came into force, that Germany withdrew the legalization of foreign corruption.  

Foreign corrupt practices of industrialized OECD countries 1994 study

The Foreign corrupt practices of industrialized OECD countries 1994 (Parliamentary Financial Commission study, Bonn).  

Belgium: bribe payments are generally tax deductible as business expenses if the name and address of the beneficiary is disclosed. Under the following conditions kickbacks in connection with exports abroad are permitted for deduction even without proof of the receiver:

  • Payments must be necessary in order to be able to survive against foreign competition
  • They must be common in the industry
  • A corresponding application must be made to the Treasury each year
  • Payments must be appropriate
  • The payer has to pay a lump-sum to the tax office to be fixed by the Finance Minister (at least 20% of the amount paid).

In the absence of the required conditions, for corporate taxable companies paying bribes without proof of the receiver, a special tax of 200% is charged. This special tax may, however, be abated along with the bribe amount as an operating expense.

Denmark: bribe payments are deductible when a clear operational context exists and its adequacy is maintained.

France: basically all operating expenses can be deducted. However, staff costs must correspond to an actual work done and must not be excessive compared to the operational significance. This also applies to payments to foreign parties. Here, the receiver shall specify the name and address, unless the total amount in payments per beneficiary does not exceed 500 FF. If the receiver is not disclosed the payments are considered "rémunérations occult" and are associated with the following disadvantages:

  • The business expense deduction (of the bribe money) is eliminated.
  • For corporations and other legal entities, a tax penalty of 100% of the "rémunérations occult" and 75% for voluntary post declaration is to be paid.
  • There may be a general fine of up 200 FF fixed per case.

Japan: in Japan, bribes are deductible as business expenses that are justified by the operation (of the company) if the name and address of the recipient is specified. This also applies to payments to foreigners. If the indication of the name is refused, the expenses claimed are not recognized as operating expenses.

Canada: there is no general rule on the deductibility or non-deductibility of kickbacks and bribes. Hence the rule is that necessary expenses for obtaining the income (contract) are deductible. Payments to members of the public service and domestic administration of justice, to officers and employees and those charged with the collection of fees, entrance fees etc. for the purpose to entice the recipient to the violation of his official duties, can not be abated as business expenses as well as illegal payments according to the Criminal Code.

Luxembourg: bribes, justified by the operation (of a company) are deductible as business expenses. However, the tax authorities may require that the payer is to designate the receiver by name. If not, the expenses are not recognized as operating expenses.

Netherlands: all expenses that are directly or closely related to the business are deductible. This also applies to expenditure outside the actual business operations if they are considered beneficial as to the operation for good reasons by the management. What counts is the good merchant custom. Neither the law nor the administration is authorized to determine which expenses are not operationally justified and therefore not deductible. For the business expense deduction it is not a requirement that the recipient is specified. It is sufficient to elucidate to the satisfaction of the tax authorities that the payments are in the interest of the operation.

Austria: bribes justified by the operation (of a company) are deductible as business expenses. However, the tax authority may require that the payer names the recipient of the deducted payments exactly. If the indication of the name is denied e.g. because of business comity, the expenses claimed are not recognized as operating expenses. This principle also applies to payments to foreigners.

Switzerland: bribe payments are tax deductible if it is clearly operation initiated and the consignee is indicated.

US: (rough résumé: "generally operational expenses are deductible if they are not illegal according to the FCPA")

UK: kickbacks and bribes are deductible if they have been paid for operating purposes. The tax authority may request the name and address of the recipient."

"Specific" legal corruption: exclusively against foreign countries

Referring to the recommendation of the above-mentioned Parliamentary Financial Commission's study,[109] the then Kohl administration (1991–1994) decided to maintain the legality of corruption against officials exclusively in foreign transactions  and confirmed the full deductibility of bribe money, co-financing thus a specific nationalistic corruption practice (§4 Abs. 5 Nr. 10 EStG, valid until 19 March 1999) in contradiction to the 1994 OECD recommendation.[115] The respective law was not changed before the OECD Convention also in Germany came into force (1999).  According to the Parliamentary Financial Commission's study, however, in 1994 most countries' corruption practices were not nationalistic and much more limited by the respective laws compared to Germany.  

Siemens corruption case

In 2007, Siemens was convicted in the District Court of Darmstadt of criminal corruption against the Italian corporation Enel Power SpA. Siemens had paid almost €3.5 million in bribes to be selected for a €200 million project from the Italian corporation, partially owned by the government. The deal was handled through black money accounts in Switzerland and Liechtenstein that were established specifically for such purposes.[121] Because the crime was committed in 1999, after the OECD convention had come into force, this foreign corrupt practice could be prosecuted. It was the first time a German court of law convicted foreign corrupt practices like a national practice, although the corresponding law did not yet protect foreign competitors in business.  

During the judicial proceedings it was disclosed that numerous such black accounts had been established in the past decades.[118]

Historical responses in philosophical and religious thought

Philosophers and religious thinkers have responded to the inescapable reality of corruption in different ways. Plato, in The Republic, acknowledges the corrupt nature of political institutions, and recommends that philosophers "shelter behind a wall" to avoid senselessly martyring themselves.

Disciples of philosophy ... have tasted how sweet and blessed a possession philosophy is, and have also seen and been satisfied of the madness of the multitude, and known that there is no one who ever acts honestly in the administration of States, nor any helper who will save any one who maintains the cause of the just. Such a savior would be like a man who has fallen among wild beasts—unable to join in the wickedness of his fellows, neither would he be able alone to resist all their fierce natures, and therefore he would be of no use to the State or to his friends, and would have to throw away his life before he had done any good to himself or others. And he reflects upon all this, and holds his peace, and does his own business. He is like one who retires under the shelter of a wall in the storm of dust and sleet which the driving wind hurries along; and when he sees the rest of mankind full of wickedness, he is content if only he can live his own life and be pure from evil or unrighteousness, and depart in peace and good will, with bright hopes.  

The New Testament, in keeping with the tradition of Ancient Greek thought, also frankly acknowledges the corruption of the world (ὁ κόσμος)[124] and claims to offer a way of keeping the spirit "unspotted from the world."[125] Paul of Tarsus acknowledges his readers must inevitably "deal with the world,"[126] and recommends they adopt an attitude of "as if not" in all their dealings. When they buy a thing, for example, they should relate to it "as if it were not theirs to keep."  New Testament readers are advised to refuse to "conform to the present age" and not to be ashamed to be peculiar or singular.  They are advised not be friends of the corrupt world, because "friendship with the world is enmity with God."  They are advised not to love the corrupt world or the things of the world.  The rulers of this world, Paul explains, "are coming to nothing"  While readers must obey corrupt rulers in order to live in the world,  the spirit is subject to no law but to love God and love our neighbours as ourselves.  New Testament readers are advised to adopt a disposition in which they are "in the world, but not of the world."  This disposition, Paul claims, shows us a way to escape "slavery to corruption" and experience the freedom and glory of being innocent "children of God". 

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