7/31/2019 8 Ways to Commit Grand Corruption (Part 1) WatchDog Watcher

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Frederick Chiluba, who was Zambias president for most

of the 1990s. was convicted of corruption. Investigators

seized his wardrobe, which included 100 pairs of

handmade shoes. (Photo from Ghanian Chronicle)

8 Ways to Commit Grand Corruption (Part 1)

Posted: June 21, 2012 | Author: scoronel | Filed under: Corruption, Global investigative reporting

Comments

Having grown up during the Marcos era,

have a morbid fascination with corruption th

takes place on a grand scale. By the time the20-year reign ended in 1986, Ferdinand Ma

cos and his glittering wife Imelda ha

amassed a fortune estimated at $10-$20 billio

dollars and stashed in Swiss banks, artwo

and real estate, including buildings in Manha

tan.

The looting continues. Only now, for example, are we beginning to get an idea of the a

sets amassed by more recently fallen dictators. Muammar Gaddafi is said to have $2

billion in bank accounts, real estate and corporate investments worldwide. Hos

Mubaraks fortune is estimated at $70 billion, including investments in companies an

real estate in London, Manhattan and Beverly Hills.

This is why I found The Puppet Masters so fascinating. Its the World Banks rece

study on 150 cases of grand corruption in 80 countries in the last 30 years. I dug into th

study while preparing for a Covering Corruption Workshop hosted by the Internatio

al Press Institute in time for its World Congress in Port of Spain, Trinidad. There

some interesting stuff in these cases, including fake loans, fictional consultanci

and 100 pairs of high-heeled, hand-made shoes for a vertically challenged presiden

Its not an easy read but a great resource for journalists investigating corruption as we

as anticorruption activists and government reformers.

Based on some of the cases in The Puppet Masters database, Ive put together 8 Wa

to Commit Grand Corruption. Theres more than eight ways, of course, but this list pr

vides a good sample of the clever ways in which officials have stolen public funds an

the lengths they went through to hide the loot. Beware: these officials have all bee

found out and tried; some are in jail.

1.Award an overpriced government contract to a shell company, subcontract the wo

to a real company that will do it for much less, and then pocket the difference.

http://www.nytimes.com/2009/06/22/world/africa/22zambia.htmlhttp://www.guardian.co.uk/world/2011/feb/04/hosni-mubarak-family-fortunehttp://watchdogwatcher.files.wordpress.com/2012/06/shoes.jpghttp://watchdogwatcher.files.wordpress.com/2012/06/shoes.jpghttp://watchdogwatcher.files.wordpress.com/2012/06/shoes.jpghttp://watchdogwatcher.files.wordpress.com/2012/06/shoes.jpghttp://watchdogwatcher.files.wordpress.com/2012/06/shoes.jpghttp://star.worldbank.org/corruption-cases/assetrecovery/?f%5B0%5D=bundle:puppet_mastershttp://www.nytimes.com/2009/06/22/world/africa/22zambia.htmlhttp://www.ipiworldcongress.com/2012/congress-news/singleview/article/covering-corruption-workshop-slated-to-open-ipi-world-congress.htmlhttp://www1.worldbank.org/finance/star_site/publications/Puppet-Masters.htmlhttp://www.guardian.co.uk/world/2011/feb/04/hosni-mubarak-family-fortunehttp://articles.latimes.com/2011/oct/21/world/la-fg-kadafi-money-20111022http://watchdog-watcher.com/2012/06/21/8-ways-to-commit-grand-corruption-part-1/#commentshttp://watchdog-watcher.com/category/global-investigative-reporting/http://watchdog-watcher.com/category/corruption/http://watchdog-watcher.com/author/scoronel/http://watchdogwatcher.files.wordpress.com/2012/06/shoes.jpg

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2002, the Kenyan government gave Anglo-Leasing and Finance Ltd. , an unknown U

company, a 32-million contract to replace its passport printing system. A French com

pany had offered to do the project for just 6 million. Anglo-Leasing a shell compan

with a Liverpool post office box for an address then proposed to subcontract the wo

to the French firm. The understanding, according to material leaked to journalists, w

that corrupt senior politicans would keep the difference. The deal never went throug

though, as it was leaked to the press by whistleblowers.

2. Create nonexistent state loans and make the payments to your own accounts. Fre

erick Jacob Titus Chiluba was president of Zambia through most of the 1990s. In 200

he was indicted in the UK for, among other things, his role in the so-called BK conspi

acy. It involved a fake 10-year, $100-million loan to purchase military equipment fro

Bulgaria. The Zambian government entered into the loan agreement in 1999, but the

is no evidence that any such transaction ever took place. Yet, over $20 million was sen

to bank accounts in Belgium and Switzerland as loan payments. The money from thand a similar scheme were then used to pay for school fees for Chilubas children, lod

ing in five-star hotels, expensive restaurants and as the London court where Chilub

was convicted noted, a $500,000-purchase of hundreds of suits and monogramme

shirts from a boutique in Switzerland as well as 100 pairs of hand-made, high-heele

shoes for the five-foot-tall president.

3. Get bribes from a multinational company and hide the money in bank accoun

and shell companies in several jurisdictions overseas. Daimler AG, the German mulnational car company, and its Russian subsidiary made over 3 million in allegedly ill

gal payments to Russian officials between 2000 and 2005. The amounts were course

through bank accounts in Latvia, Switzerland, the US and other places. These account

in turn, were in the names of 27 companies in seven different jurisdictions. Some

these were shell companies; others were legitimate companies that did business with th

Russian government, None of them provided any services to Daimler, but received th

money on the understanding that they would be passed on to the officials concerne

This case is now being litigated in the U.S. and investigated in Germany and Russia,

4. Set up a fake consultancy firm and hide the payments there. In 2009, Joseph Brun

New Yorks long-serving senate majority floorleader and one of the most powerf

politicians in the state, was indicted for receiving over $3 million in consulting fees pa

to a consultancy company in which he had interests. The payments were made to a she

company, Capital Business Consultants, a limited liability company which Bruno ha

http://www.nytimes.com/2009/12/08/nyregion/08bruno.htmlhttp://www.assetrecovery.org/kc/node/4ec2e572-cd77-11dc-b471-db7db47931e5.0;jsessionid=17376D38EF11CF6F5D68C54B6921AF80http://star.worldbank.org/corruption-cases/node/18608

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incorporated. It had no real function except to receive his payments for fictional consu

tancy services. The company was also used to conceal Brunos ownership in a compan

that had contracts with New York state. (More in the next post)

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