Corruption

WORLD CORRUPTION
THE OIL FOR FOOD PROGRAM CORRUPTION

SUMMARY

On December 9, 2004 citizens around the world have celebrated the first ever United Nations International Anti-Corruption Day. In the same time the Oil for Food Program Corruption is storming the UN! This event illustrates that there is a gap between rhetoric and reality. In fact, World Corruption is increasing.

According to our exclusive calculations, world corruption accounts for about $700 billion. This figure is twofold the entire African GDP (316 billions). It is a massive phenomena and a real cancer destroying the benefits of globalization in many poor countries.

In our opinion, Moral relativism is one of the causes of this global phenomenon. We may realize that Capitalism cannot work without a minimum of ethical values.

Fortunately, The G.W.Bush election has been the victory of ethical values over moral relativism. Consequently, all the honest persons are expecting a strong commitment in order to cure this cancer. We hope that the US intelligence agencies will identify corrupt people in all countries and release their observations to the public.

We shall begin with a case study: the Oil for Food Program. Through its detailed analysis, we shall describe the mechanisms, causes and effects of corruption in the world. Then, we shall propose some solutions.

1-CASE STUDY 2-CORRUPTION 3-CAUSES 4-SOLUTIONS 5-CONCLUSION

1-CASE STUDY:THE OIL FOR FOOD PROGRAM

We shall start with a case study: The Oil for Food Program. Globally, It will enables us to describe the mechanisms and the actors of the corruption network.

The best way to expose the case is to reproduce here the letter of Norm Coleman published in the wall street journal (We have just underlined some sentences). Norm coleman is the chairman of the US Senate Permanent and bipartisan Subcommittee on Investigations.

11-The open letter

“Over the past seven months, the Senate Permanent Subcommittee on Investigations, which I chair, has conducted an exhaustive, bipartisan investigation into the scandal surrounding the U.N. Oil-for-Food program. That noble program was established by the U.N. to ease the suffering of the Iraqi people, then languishing under Saddam Hussein's ironfisted rule, as well as the economic sanctions imposed on Iraq by the U.N. after the first Gulf War. While sanctions were designed to instigate the removal of Saddam from power, or at least render him impotent, the Oil-for-Food program was designed to support the Iraqi people with food and other humanitarian aid under the watchful eye of the U.N.

Our Investigative Subcommittee has gathered overwhelming evidence that Saddam turned this program on its head. Rather than erode his grip on power, the program was manipulated by Saddam to line his own pockets and actually strengthen his position at the expense of the Iraqi people. At our hearing on Nov. 15, we presented evidence that Saddam accumulated more than $21 billion through abuses of the Oil-for-Food program and U.N. sanctions. We continue to amass evidence that he used the overt support of prominent members of the U.N., such as France and Russia, along with numerous foreign officials, companies and possibly even senior U.N. officials, to exploit the program to his advantage. We have obtained evidence that indicates that Saddam doled out lucrative oil allotments to foreign officials, sympathetic journalists and even one senior U.N. official, in order to undermine international support for sanctions. In addition, we are gathering evidence that Saddam gave hundreds of thousands -- maybe even millions -- of Oil-for-Food dollars to terrorists and terrorist organizations. All of this occurred under the supposedly vigilant eye of the U.N.

While many questions concerning Oil-for-Food remain unanswered, one conclusion has become abundantly clear: Kofi Annan should resign. The decision to call for his resignation does not come easily, but I have arrived at this conclusion because the most extensive fraud in the history of the U.N. occurred on his watch. In addition, and perhaps more importantly, as long as Mr. Annan remains in charge, the world will never be able to learn the full extent of the bribes, kickbacks and under-the-table payments that took place under the U.N.'s collective nose.

Mr. Annan was at the helm of the U.N. for all but a few days of the Oil-for-Food program, and he must, therefore, be held accountable for the U.N.'s utter failure to detect or stop Saddam's abuses. The consequences of the U.N.'s ineptitude cannot be overstated: Saddam was empowered to withstand the sanctions regime, remain in power, and even rebuild his military. Needless to say, he made the Iraqi people suffer even more by importing substandard food and medicine under the Oil-for-Food program and pawning it off as first-rate humanitarian aid.

Since it was never likely that the U.N. Security Council, some of whose permanent members were awash in Saddam's favors, would ever call for Saddam's removal, the U.S. and its coalition partners were forced to put troops in harm's way to oust him by force. Today, money swindled from Oil-for-Food may be funding the insurgency against coalition troops in Iraq and other terrorist activities against U.S. interests. Simply put, the troops would probably not have been placed in such danger if the U.N. had done its job in administering sanctions and Oil-for-Food.

This systemic failure of the U.N. and Oil-for-Food is exacerbated by evidence that at least one senior U.N. official -- Benon Sevan, Mr. Annan's hand-picked director of the U.N.'s Oil-for-Food oversight agency -- reportedly received bribes from Saddam. According to documents from the Iraqi oil ministry that were obtained by us, Mr. Sevan received several allotments of oil under Oil-for-Food, each of which was worth hundreds of thousands, if not millions, of dollars.

To make matters worse, the actions of Mr. Annan's own son have been called into question. Specifically, the U.N. recently admitted that Kojo Annan received more money than previously disclosed from a Swiss company named Cotecna, which was hired by the U.N. to monitor Iraq's imports under Oil-for-Food. Recently, there are growing, albeit unproven, allegations that Kofi Annan himself not only understands his son's role in this scandal -- but that he has been less than forthcoming in what he knew, and when he knew it.

As a former prosecutor, I believe in the presumption of innocence. Such revelations, however, cast a dark cloud over Mr. Annan's ability to address the U.N.'s quagmire. Mr. Annan has named the esteemed Paul Volcker to investigate Oil-for-Food-related allegations, but the latter's team is severely hamstrung in its efforts. His panel has no authority to compel the production of documents or testimony from anyone outside the U.N. Nor does it possess the power to punish those who fabricate information, alter evidence or omit material facts. It must rely entirely on the goodwill of the very people and entities it is investigating. We must also recognize that Mr. Volcker's effort is wholly funded by the U.N., at Mr. Annan's control. Moreover, Mr. Volcker must issue his final report directly to the secretary general, who will then decide what, if anything, is released to the public.

Therefore, while I have faith in Mr. Volcker's integrity and abilities, it is clear the U.N. simply cannot root out its own corruption while Mr. Annan is in charge: To get to the bottom of the murk, it's clear that there needs to be a change at the top. In addition, a scandal of this magnitude requires a truly independent examination to ensure complete transparency, and to restore the credibility of the U.N. To that end, I reiterate our request for access to internal U.N. documents, and for access to U.N. personnel who were involved in the Oil-for-Food program.

All of this adds up to one conclusion: It's time for Kofi Annan to step down. The massive scope of this debacle demands nothing less. If this widespread corruption had occurred in any legitimate organization around the world, its CEO would have been ousted long ago, in disgrace. Why is the U.N. different?”

12-Analysis

The Senate committee has gathered evidences that Saddam accumulated more than $21 billion through abuses of the Oil-for-Food program and U.N. sanctions. Now, we shall examine the scheme and the main actors.

121-The global scheme

The mechanism of the corruption is described by the next drawing:

DRAWING 1

The oil exports were supposed to give some resources to the Iraqi State in order to buy food and humanitarian stuff for the Iraqi people. Let’s us suppose that the international oil price is $40 the barrel. For each exported barrel, the Iraqi power was supposed to import $40 in food drugs and so on. In fact, the Iraqi power sold the barrel at only $30 and the difference was paid by the companies under-the-table to the private accounts of Saddam Hussein. With these $10, Saddam financed the terrorists and of course pocketed a large amount of the money.

Secondly, Saddam gave some oil allotments to his friends such as foreign officials, journalists and at least one civil servant inside the UN. These people kept the $10 difference in their own private banking accounts.

Of course the main victim was the Iraqi people. Instead of receiving $40 in food and humanitarian stuff, it only received $30. Not only Saddam but also the people he bribes are responsible's of the suffering of the Iraqi people. This type of monkey business is very current in the Oil business and impoverishes the people of oil countries.

Globally, another massive source of corruption is also the selling of equipments to public contractors. This corruption obeys to another scheme. Look at the next drawing:

In order to be selected at the detriment of other competitors, the company bribes the Public contractor senior officials. Since the company must compensate the cost of the bribes, the equipments are sold at a higher price or with a lower quality than the international standards. This scheme affects not only the undeveloped countries but more and more the developed countries.

122-Actors

In our case study, Oil companies and a dictator are the main actors. Globally speaking, any grand corruption always implies some big companies and some State or Public contractors. In this scheme, the ruling power is the main beneficiary of the bribes. For example, Suharto accumulated $35 billion over 30 years ( And Mobutu only 5 billion over the same period). As a result, the money coming from corruption owned by some dictators often exceed the total GDP of the population they rule. It is notably obvious in oil States both in Africa and the Middle East.

On the other hand, the bribery of the ruling power into the democracies corresponds to a new emerging phenomenon. In our case study, France and Russia are pointed but recently many scandalous affairs have been reported in an increasing number of free countries.(A Prime Minister of Japan, two former Presidents of South Korea, the Secretary General of NATO, three former Prime Ministers of Italy and a former Prime Minister of India). It means that there is a contamination of corruption in developed countrie.

Another new fact is the increase of kickbacks. Look at the drawing 2: It shows that the executives of the company and the senior of the public contractor are sharing the bribes. For example in the Taiwan fregates affair, a part of the bribes given to the chinese's was retro ceded (Kickback) to many officials in France: The amount of these kickbacks was expected to account for $1,3billion!

Finally, our case study introduces a new actor: the journalist. Indeed, Norm coleman states “We have obtained evidence that indicates that Saddam doled out lucrative oil allotments to foreign officials, sympathetic journalists and even one senior U.N. official, in order to undermine international support for sanctions”.

Usually, journalists were on the front line against corruption. Many press investigations have contributed to topple some corrupt leaders all around the world. It is the first time that journalists are quoted among the corrupt people. Firstly, it means that corruption is expanding everywhere. Secondly, it may explain why this scandal is so hidden by the newspapers of some prominent countries.

1-CASE STUDY 2-CORRUPTION 3-CAUSES 4-SOLUTIONS 5-CONCLUSION

2-CORRUPTION IN THE WORLD

Starting with our case study, we have described the mechanisms and the actors of corruption. Now, we shall estimate its world amount. Through some calculations, we may posit that the world corruption accounts for about $700 billion.

It is a big picture: Twofold the entire African GDP (316 billion). It is a massive phenomenon and a real cancer destroying the benefits of globalization in many poor countries.

21-Evaluation of world bribery

Of course, the amount represented by the corruption is supposed to be unknown. In order to estimate this figure, we have applied a percentage of bribery to the the GDP (in $ billion) of each region (The source of the GDP is the World Bank little data book-2003). We have determined the percentage in using different sources (and notably the corrupt index of Transparency international) and our own experience.

DRAWING 3

Year--------------------------- 1990--- %---R----2001---%----R

Latin America------------------- 1135---- 5--- 56--- 1969--- 5----98
East Asia and Pacific--------------674---- 5--- 33--- 1665-- 10---166
Europe and central Asia----------1240---- 5--- 62---- 994---15-- 149
Middle east and North Africa------ 413--- 10--- 41---- 698---15-- 105
South Asia----------------------- 405--- 10--- 40---- 614---10--- 61
Subsaharan Africa---------------- 297--- 10--- 30---- 316---10--- 31
High income countries-----------17667--------- 50--- 24887------- 90

WORLD------------------------ 21831--------312---31143------700

These percentages may appear very large but we must underline that they include both petty corruption (About $400 billion) and grand corruption (About $300 billion)

211-Petty corruption

Beside the grand corruption (For example our case study), there is the petty corruption: Poor people have to pay low or middle civil servants in order to get access to security, health, education, justice and so on. Many NGO have a benign neglect for this petty corruption (or facilitation's) because it corresponds to some cultural habits and involves small amounts of money and relatively low level officials.

We think that this day to day corruption corresponds to bad cultural habits and must be condemned because it is always paving the way to grand corruption. The existence of this petty corruption is often the sign that you are in a country exposed to grand corruption (For example, in the Middle East and Africa. Petty corruption does not exist in Finland!).

Moreover, this petty corruption affects large populations. For example, look at the recent survey by www.transparency.org , entitled Corruption in South Asia ( India, Pakistan and Sri Lanka). It indicates that 100% of households polled reported paying bribes in relation with the police, the judiciary, or the land administration. In most undeveloped countries, public services such as drinking water, education, health and law enforcement are supposed to be free but nurses, forestry guard, policemen and so on are constantly asking bribes.

As a result, this petty corruption may represent huge amounts of money since the little streams make the big rivers!. The above survey reports that more than half of the users of public hospitals in Bangladesh, had paid a bribe to access a service, with bribes averaging $33. In Pakistan, 92% of households that had experience with public education reported having to pay bribes; the average amount paid was $86.

Now, let’s us suppose an Indian family composed with the father, the mother, the great mother and four young children (7 persons). Since the GDP per capita is $460 in India (source World bank-Little data book 2003), you may expect that this family enjoys a global revenue of: 7*460= $3220 per year.

According to the figures reported by the above survey, we shall calculate how much this family will pay for bribes in one year:

-2 public hospital consultations for the great mother and 1 for each child: 6*$33= $198
-4 access to public and free education: $88*4= $352
-Miscellaneous: 10% of the above sum: 198+352=550*10%=55
-Total: 198+352+55= $605 that is to say 18.8% of the global income ($ 3220 a year)

Now, let’s us consider that the population of India accounts for 1032 million people and that our 7 persons family is an average family. It means that we have 1032 million/7= 147 millions of such families. The global petty corruption represents: 147million*$605 = $89 billions!

According to our Drawing 4, the estimation of bribery for South Asia only accounts for 61 billion. It includes both the petty and the grand corruption. Secondly, South Asia covers India, Pakistan, Sri lanka, Bangladesh, Afghanistan and Nepal. What it means? It means that our estimate may be too low.

India is ranked as a free country but what about Africa! In this part of the world, small merchants pay bribes at each entry of village to the police and at each border to the custom officers. They may pay bribes ten times a day! Moreover, poor people pay bribes to the military for having the right to stay alive or for preventing their wife's or daughters to be raped. In fact in these countries, it seems difficult to distinguish bribery and money extortion. It means that our percentage of 10% for Africa is certainly lower than the reality.

Public western opinion and NGO mainly focus on grand corruption because it’s a “sexy” issue: Naughty western companies are bribering poor Third world leaders. In fact, the petty corruption is more disturbing than the grand corruption for the very poor people. It means that the worst exploitation occurs inside the poor populations: Poor civil servants such as nurses, military, policemen, forestry guards, custom officers constantly pressure, without any compassion, the poor's farmers and merchants in the undeveloped world.

What is the difference between the poor civil servants and the poor farmers? The former are educated and the latter are often illiterates. On the other hand, the former are wrong people and the latter are mostly honest people. Every traveler can testify that small farmers and merchants are genuinely honest's and offer some high moral values that we have lost for long in our western countries. What does it mean? : It means that the education system we have exported in these countries is fundamentally wrong and rotten. We will have to recall this fact when we shall study the causes.

Finally on the world amount of bribery evaluated to 700 billion, we may suppose that petty corruption accounts for 400 billions.

212-Grand corruption

Grand corruption is the abuse of public power for private gain. Oil business and our case study are related to grand corruption but the most common form is the awarding of major contracts on the basis of bribes made to senior civil servants. Grand corruption implies big companies, people in position of power, and very large bribes.

According to our calculations, grand corruption should account for about $300 billions. On this amount, $90 billion are related to high income countries. In these countries the petty corruption does not exist. Corruption is only linked to the public investments and notably the military establishment.

Regarding the undeveloped countries, grand corruption is limited to very few people. Sojourning in an African country accounting 4 millions people, I calculated the number of notoriously corrupted senior people. I only got 40 persons. It means 10 persons for a million. On the other hand, the yearly amount of bribes received by each person is difficult to evaluate. Of course, Suharto got $1 billion per year and Mobutu only 150 millions per year. However, these cases remain exceptional.

22-Evolution

Over the last ten years, corruption has increased by 130% and the world GDP by 50%.

DRAWING 4

YEARS---------------------------1990--------------------2001

World GDP in $billions-------------21,000-------------------31,000 + 50%

Corruption------------------------ 300--------------------700 --+130%

Report to our drawing 3: We have increased the percentage of bribery in:

-East Asia and Pacific from 5 to 10%: The increase is justified because of the rapid growth of China which is reported as a grand corruption place.

-Europe and central Asia from 5 to 15%: This entire region represents the former soviet Union. The nomenklatura has captured the main assets through false privatizations.

-Middle East and North Africa from 10 to 15%: The oil for food program and the wealth of Arafat are some good examples of the evolution in this region.

-High income countries: The increase has been calculated in relation with the evolution of military expenses (USA) and public investments.

Transparency international reports that the size of the bribes paid has increased: “Thirty years ago 5% of a contract price would have been regarded as quite a high proportion to pay in bribes in most countries, but now 20% is not at all uncommon in many places”.

23-Negative effects

In our case study two negative effects are clearly identified: Firstly corruption may change decision making policy. Norm Coleman states “ Since it was never likely that the U.N. Security Council, some of whose permanent members were awash in Saddam's favors, would ever call for Saddam's removal, the U.S. and its coalition partners were forced to put troops in harm's way to oust him by force”. Secondly, corruption increases world insecurity. In this example, a part of the money was given to terrorists and terrorist organizations “Today, money swindled from Oil-for-Food may be funding the insurgency against coalition troops in Iraq and other terrorist activities against U.S. interests”

In fact the negative effects of corruption are so numerous that we can only list them:

-Petty Corruption threatens human rights: We have given above many examples.

-Grand Corruption impedes development because many decision making related to investments are wrong. This situation explains why so many plants in Africa have never worked. Moreover, Corruption reduces direct investments because many companies are reluctant to invest in some areas such as Africa.

-Grand Corruption increases the likelihood of currency crisis: The financial crisis in East Asia and in South America illustrates this phenomenon.

-Corruption also increases inequalities and boosts a resentment among population and a lost of confidence in any institution.

-Corruption introduces a negative change in our societies:

Let’s us develop this idea: Marx predicted the diminishing of the farmers class and the emergence of a new high paid salary class. He did not predict the appearance of a new middlemen class only specialized in laundering of dirty money, facilitation, organization and management of corruption.

Indeed, we observe everywhere many middlemen with easy money. I mean a money that they spent ostensibly and they have earned without any effort. It means that more and more people are involved in corruption and illegal activities. In Annex, we have estimated illegal activities and have found a picture accounting for about $1200 billions (Drug trafficking, counterfeiting, prostitution, monkey business and so on)

Globally, we may underline the danger that this new phenomenon is representing. More the globalization extends, and more it is confronted to the authoritarian societies. As a result of this confrontation, a new society is appearing : not the free society, nor the classic authoritarian society but the mafia society. The next drawing illustrates this process

DRAWING 5

If we do not pay attention to this phenomenon, be sure that like an internal virus it could destroy the entire globalization and our free society

In short, it could be said that corruption is threatening human rights, economic development and political stability. In fact, corruption has undermined the benefits of globalization in many countries. Clearly, its increase and spreading all over the world is introducing negatives changes in the structures of Capitalism.

1-CASE STUDY 2-CORRUPTION 3-CAUSES 4-SOLUTIONS 5-CONCLUSION

3-CAUSES

Corruption is by no means a new issue but it has only recently emerged as a global issue.

31- Is corruption linked to Globalization?

The anti globalization movement uses grand corruption as an argument against the globalization. It considers that besides the globalization of business, there is a globalization of crime facilitated by the disappearance of state controls and by the high technology, which permits the rapid circulation of money. In fact, lower State control and higher technology explain the increase of the circulation of money but are not directly related to the increase of corruption.

They also underline the role of transnational companies. Certainly, these companies (and notably the oil companies ) play a great role in the bribery business but they are operating for many decades. This fact cannot explain the increase that we have observed during the ten last years.

Since there are large inequalities, between the low salaries of public servants and the enormous sums they have to manage, people could be more and more tempted by corruption. This argument sounds wrong: Firstly, the bankcashers who manage huge sums every day are not inclined to corruption. Secondly, most of public servants are honest's in developed countries (but not in undeveloped where most of them are corrupt). Thirdly, corrupt people are often occupying top positions. In short, let’s us say that the poor's are the victims of corruption and not the beneficiaries.

On the other hand, conservatives claim that corruption is linked to State regulations and the number of civil servants. Consequently, they ask for less regulations and more privatizations. In fact, during the last ten years, State regulations have been everywhere diminished and many statist companies were privatized. Normally, corruption should have decreased instead of growing.

Conservatives may argue that Globalization has really extended over the world while democracy hardly followed the same path. In 2003, according to www.freedomhouse.org there are 88 free countries and 104 partly free and not free. It is interesting to note that this latter figure is quite unchanged since 1973. What’s more, the extend of democracies is now blocked by a hard rock in Africa and in the Middle East. However, since the number of not free and partly free countries remains constant, it cannot be held responsible of the increase of corruption. Nevertheless, it could be said that since most of the not free and partly free countries are open to the world, more people have access to corruption.

Finally, it seems that there is a contamination coming from the undeveloped countries. For many years, companies working overseas have used bribery as an effective way of gaining an advantage over their competitors. As a result the lessons learned in these countries may have been extended to developed countries. Salesmen coming back from the Third world have applied their methods in Europe or in the US. This explanation sounds right but it only applies to the increase of grand corruption in developed countries.

In conclusion, we do not find any strong evidence about a link between corruption and globalization. It means that the phenomenon could be related to another form of “globalization”: The extend of wrong moral concepts and behaviors!

32-Moral Causes

Many people who were honest are becoming dishonest. Why? That is the real question! We will not find the answer in the stats or figures. We have above underlined the role of education. The poor civil servants who exploit the poor illiterates farmers are educated. Does It mean that the education system we have exported in the world is fundamentally wrong and rotten? Indeed, this education is deprived of moral issues. More precisely, this education propagates over the world a lot a wrong ideas coming up from the Materialism.

We have to distinguish the old and the new materialism. The old Materialism (Mainly Marxism) inversed the values. However, any inversion of values does not deny the values by themselves and just replaces some values by other. For example the marxists considered that some behaviors were morally grounded such as the proletarian heroism. The marxist leaders had no choice: When you are in charge of command, you are obliged to erect some values shared by the people you rule. No common values, no governance.

With the end of the Soviet Union, this moderate Materialism vanished. Then, the reign of irresponsible scholars began. Disseminated in our faculties, they are propagating a new Materialism.

This new Materialism does not inverse the values. It states that there is no values at all. It means that it is a true nihilism based on the idea of nothingness. It posits that you are the result of random chemicals that came together by chance. Your life is meaningless. You are individually worthless. Good and evil are no sense. Consequently, individuals have no freewill, do not bear any responsibilities and cannot be judged as guilty. All our judicial institutions are meaningless.

As a result, the only goal is to exist and to get plenty food and sex. Obviously, corruption is an easy way to reach this new paradise!

Moral relativism is one of the causes of the increase of grand corruption. We may realize that the capitalism cannot work without a minimum of ethical values.

1-CASE STUDY 2-CORRUPTION 3-CAUSES 4-SOLUTIONS 5-CONCLUSION

4-SOLUTIONS

As the global implications of corruption have grown, the OECD, the Organization of American States, the World Trade Organization, and the United Nations General Assembly, the World Bank and the International Monetary Fund have both begun to emphasize corruption. Unfortunately, there are many conferences and few progress.

41-A difficult track

Voltaire said that a rape was difficult to commit and difficult to prove. Corruption is easy to commit but far difficult to prove.

Once again, we have to report to our case study. Clearly the discovery of the scandal results of the fall of Saddam. Most of the revelations come from the Iraqi oil Ministry. The UN which was in charge of monitoring the program is accused through one of its senior officer to have been corrupted. This situation is not unique: We have recently known some scandals about auditing firms giving false information's on the companies they were supposed to monitor. This fact worsen the panorama because it illustrates that we cannot only rely on monitoring.

What is more, it is quite impossible to trap the corrupt people as long as you have not access to the accounting. To that end, Norm Coleman reiterates the senate commission request for access to internal U.N. documents, and for access to U.N. personnel who were involved in the Oil-for-Food program. In fact, “as long as Mr. Annan remains in charge, the world will never be able to learn the full extent of the bribes, kickbacks and under-the-table payments that took place under the U.N.'s collective nose”. Indeed, Many people have a strong interest that Mr Annan remains in charge.

This case study shows how it is difficult to track and to trap corruption. Any corrupt people has many accomplices and each of them tries to dissimulate the truth. It's really a great friendship world! As long you have not access to the private accounts of people, you cannot determine where the money is coming from. You may have suspicions but you cannot prove anything. In criminal affairs, the judge may have access to banking accounts. Unfortunately, the fiscal paradise and others off shore places have been set up to prevent any investigations. Look at the next drawing.

DRAWING 6

It is the same as drawing 2 but the relations between corrupt people do not appear because all the flows of money transit through fiscal paradises. For example the company through its local branches situated in Caiman islands pays the bribes into the public contractor official’s private account in Bahamas. Then, the public contractor official shares the bribes with an executive whose the private account is in the Anglo Normand islands and so on. These transactions are protected by the banking secret of the fiscal paradises and all the investigations are stopped at their doors.

What is more, in some cases, and notably in France, corrupt people may be protected by the “secret defense”. In the Taiwan fregates affair, the socialist and conservative governments both opposed the “secret defense” to the judge.

42-Some practical steps

421-Encouraging defectors.

Every fortress has its trojan horse. The corrupt network functions with banks and many persons just like a criminal or a spy organization. In these organizations, the failure always occurs thank to an inner treachery. Just return to the drawing: Let’s us suppose that the public contractor official omits to pay the kickback to the company executive. Of course, the latter has no empowerment to get this dirty money but we may suppose that he will become angry! Consequently, he can denounce both the company and the public contractor official. Moreover, he can provide the investigators with all the ledgers, orders, invoices, checking accounts and receipts related to the company Caiman branches.

Most of the secret affairs are mainly unveiled by defectors. A practical solution should be to encourage defectors with rewards in money (for example a percentage of the unveiled bribery). I think that such a measure would really threaten all the corrupt network (On the other hand, the defector risks to be "suicided"! Eight strange deaths occurred with regard of the Taiwan fregates affair!)

422-Monitoring the oil business and the international aid

As we have seen, the oil business plays a major role in grand corruption all over the world and both in developed and undeveloped countries. Big oil companies should be obliged to publish what they pay in fees, royalties and other payments to host governments and state oil companies. On the other hand, host governments should be obliged to publish their receipts in the oil sector. The refusal to publish should conduct to stop any aid to these countries.

More generally, Western governments should close the Aid pipe line toward corrupt countries. In our opinion, governments should use corruption scores to determine which countries receive aid, and which do not. Clearly, the recently-adopted OECD convention outlawing bribery of foreign public officials does not represent a sufficient tool. For example, despite this convention, a big company is actually involved in Costa Rica. Go to www.transparency.org

43-Fiscal paradises

We have to question ourselves about the existence of these so-called fiscal paradises. As long as fiscal paradises do exist, all the speeches about the struggle against corruption will only be lip service.

A recent report estimates at 5000 billions dollars the amount of saving accounts in fiscal paradises (There are all over the world at least 55 fiscal paradises. The best known are the Cayman Islands, the Bahamas, the British Virgin Islands, the Bermudas, Saint Martin, Vanuatu, the Cook Islands, Luxembourg, Maurice Island, Switzerland, the Anglo-Normand Islands, Monaco, Gibraltar, Malta)

The fiscal paradises are used by many wealthy people in order to avoid taxes. We may argue that this fiscal evasion is also a case of corruption. It means that some people make pressure on their own politicians in order to protect the existence of these fiscal paradises. Of course, one may argue that fiscal evasion is a legitimate reaction against massive fiscal pressure but I cannot agree with that. If you think that your fiscal pressure is too high, you have just to close your luggage's, to buy an one way flight ticket and to expatriate in another country. On the other hand, when you stay in the country, it means that you continue to enjoy high roads or free education without paying the correspondent taxes. It means that you are a free rider: The taxes you do not pay are supported by the other taxpayers!

What is more, fiscal paradises are fueled by crime, narcotics, terrorism and mainly grand corruption. Unfortunately, the Western governments do not want to dismantle these “hell spots”! Consequently, we may claim that this refusal is due to a dilute form of corruption (Pressure of some very wealthy persons who contribute to finance the electoral campaigns)

As an alternative, we could propose to set up a world agency in order to monitor all the flow and outflow of money in connection with the worst fiscal paradises. Of course, it could be a difficult task but we may assert that the technology which facilitates the circulation of money may also facilitate its monitoring. Of course we know that people use phony names and numerated accounts but the technology is able to decrypt that. It is just a question of willingness.

44-Education and Moral rearmament

Clearly, the world suffers of a lack of morality: Once again, we must emphasize on education. Go to the global learning system. We must also underline the need for a transcendental truth: Go to Spiritual odyssey. Clearly, that is another story!

1-CASE STUDY 2-CORRUPTION 3-CAUSES 4-SOLUTIONS 5-CONCLUSION

5-CONCLUSION

To conclude, I may repeat the ethical advices I give to new entrepreneurs by the end of our Entrepreneurship program (go to Business Advisor):

“Never be involved in some traffic or rotten bargains. More precisely, be very clean about every kind of bribery. Do not accept gifts. Never give bribes. Bribery can put the trouble among your own staff and will surely expose you to blackmail. Remind that it is better to lose a contract than to be involved in some monkey business!

What is more, if a civil servant asks you a bribe, report it to your embassy and to international organizations. Bribery is a plague for free trade. Fight it!"

ANNEX: OTHER CRIMINAL ACTIVITIES

According to the UN, The profits controlled by the Mafiosi (prostitution, drug trafficking, gambling, the illegal trafficking of arms) account for about 1000 billion dollars. In including counterfeiting, the figure could be higher. According to our own evaluations (See below) the total illegal activities (without grand corruption and fiscal evasion) could account for $1200 billions.

1-Drug trafficking

According to the UN and NGO, Drug trafficking is estimates at $500 billions. Some specific sources indicates only 150 billion. Of course the difference is due to the level of the trade channel : Primary production in Afghanistan, Pakistan, Morocco, Burma, Columbia does not exceed 150 billion. In including all the margins until the retailer dealers, it may reach $500 billion.(190 millions people in the world are drug addicted)

2-Counterfeiting

Counterfeiting accounts for 5% to 7% of world trade. Since the world trade represents $12,000 billions, counterfeiting could account for $600 billions. Motor vehicles, household appliances, toys, medicines and foods are the most concerned sectors. The phenomenon is experiencing unprecedented growth (25 millions products seized in the European Union in 1999, 70 millions in 2000 and more than 100 millions in 2001).

3-Arms trafficking

NGO claim that Global military expenditures and arms trade account for $900 billions, annually. This figure includes national expenditures (such as the US defense budget: $400 billions). The real Arms trade is about $50 billion and the illegal arm traffic should not exceed 5 or $10 billion.

4-Prostitution and so on

We may retain $100 billions in including all the other types of crimes and illegal trafficking such as animals (Washington convention) and so on.

Useful links-Click below:

www.transparency.org

www.freedomhouse.org

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