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Issues and Reports

Issues & Reports No 10.

COMBATING CORRUPTION IN CENTRAL AND EASTERN EUROPE
Edited by
Hiroyuki Shinkai

INTRODUCTION

A Seminar on Anti-Corruption Strategies for Central and Eastern European Countries took place at the International Law Enforcement Academy (ILEA) in Budapest, Hungary from 7 to 12 April 1997. It was organised by the United Nations Interregional Crime and Justice Research Institute (UNICRI) and funded by the Department of State of the United States of America.

The Seminar was attended by 35 participants from Bosnia and Herzegovina, Bulgaria, The Czech Republic, Estonia, Hungary, Poland, Romania, The Russian Federation and Ukraine as well as 7 international experts.

Corruption is regarded as a major problem in society, one capable of endangering the stability and security of societies, undermining the values of democracy and morality, jeopardising social, economic and political development, and threatening peace. Because of current growing concerns about corruption as well as a rapid expansion of the sphere of corruption, law enforcement officials can find themselves in an ambivalent situation. On the one hand, they have duties to strictly apply and interpret existing law in order to maintain the "rule of law". On the other hand, they might be criticised as being inflexible in coping with the situation even though, in fact, it is often the law that has not been adjusted to a modern, fast-changing world.

Demands of the criminal justice officials, especially of law enforcement officials, are increasing rapidly in this field. At the same time there is a greater possibility for them to accomplish this work by exchanges of information on successful investigation and prosecution methods. This seminar was constructed to assist law enforcement officers in these situations.

The aims of the Seminar were to give officers with line responsibility for investigating and prosecuting corruption:

·	information on general causes and characteristics of corruption in the participating countries;
·	information on anti-corruption strategies to identify and analyse problems encountered in investigation and prosecution;
·	suggestions on best practices with respect to both preventive and repressive control mechanisms, including how inadequacies in respective laws impeded their use; and legal developments in defining "corruption" so as to comply with the principle of legality.

These objectives were achieved by thorough discussion of the case-studies that each participating country was requested to prepare, as well as of cases and other material presented by UNICRI's experts.

INTERNATIONAL TRENDS IN ANTI-CORRUPTION STRATEGIES

Mr. Herman Woltring, Director of UNICRI, discussed the most recent international initiatives at the legislative and enforcement levels aimed at fighting corruption. He highlighted three discernible international trends, i.e., developments in criminal law, administrative law and regulatory mechanisms; procedures to detect and prevent corruption; and forfeiture of criminally obtained assets.

Discussion arose on the range of property that subsequently may become the subject of forfeiture or confiscation, especially in the case of severe inflation. Three types of legislation were identified in this respect. The first type only allows for the confiscation of the direct proceeds of the crime in question; the second type allows for the confiscation of even the indirect proceeds; and the third one is a mixture of the two. It was stressed that each country should choose the most appropriate mode according to its own criminal policy.

Professor Ernesto Savona of the University of Trento presented corruption trends in Western as well as Eastern and Central Europe. He identified six corruption patterns in Western Europe and analysed political instability, the privatisation process, low salaries of public officials and the presence of organised crime and their discernible links with corruption in Eastern and Central Europe. The regulation and sanctioning of corruption in the region were then discussed. It was noted that even though corruption in the private sector is frequently discussed, only two countries (Sweden and Denmark) explicitly prohibit it by criminal law in terms of "corruption".

A session on new legislative trends, chaired by Mr. Andrew Wells, Senior Legal Advisor of United Nations International Drug Control Programme (UNDCP), identified several remarkable changes and relatively rapid reconsideration processes in the legal framework of the participating countries. It was, however, also recognised that such changes in the legal code sometimes remain "on the books" and may not reflect a "real" breakthrough in the investigation and/or prosecutorial practices.

Mr. Michael De Feo, Assistant Director of the Federal Bureau of Investigation, presented a sample case-study for the United States. In the case-study, a Congressman was approached by an FBI undercover agent and agreed to receive a bribe in exchange for introducing legislation. The controversial theme of the use of undercover agents or agents provocateurs was discussed. It was emphasised that the use of such agents is dependent on the national legal system, but that many countries with long democratic histories had found them necessary in dealing with this form of clandestine activity.

CASE DISCUSSIONS

Submitted case-studies were examined in four different categories, namely; corruption of police and customs, corruption in the administrative process, corruption in the judiciary and corruption in the privatisation process.

Corruption of police and customs

The session was chaired by Mr. De Feo. Four case-studies were presented. Three of the cases involved corruption among the police and one involved corruption in the customs service. In two cases, the information leading to the investigation was provided by victims, i.e. the persons who were solicited for a bribe or victims of extortion. In one case the information appears to have come from citizens who witnessed the receipt of bribes by a customs officer. This variety of sources emphasises the importance of citizens' co-operation and their confidence that appropriate action will be taken if official misconduct is reported to the authorities. Such co-operation and confidence is absolutely essential for the success of an anti-corruption strategy.

In two cases audio-visual surveillance was utilised. Some countries restrict the use of these techniques to the investigative stage and do not admit the results as evidence. There is a trend to permit their use as evidence only after authorisation by an independent authority, such as a court or chief public prosecutor.

The discussion on legislation revealed many inadequacies even though most countries have some rudimentary tools in their penal codes and codes of penal procedures to combat corruption. A particularly hard problem was posed by a case-study in which all the members of the public, the investigative agency and the prosecution performed their duty, but the court failed to process the case.

The importance of mechanisms of co-operation and control was stressed. Investigative resources assigned to prosecutorial bodies are necessary in order to investigate police misconduct, sometimes with the assistance of specialised agencies such as the Polish Office for the Protection of the State and the internal security services of the Hungarian law enforcement bodies.

Dr. Ugljesa Zvekic, Deputy Director of UNICRI, presented an analysis based on the results of the International Crime (Victim) Survey. Even though the results are limited to "street level" corruption, the survey provides - unlike official statistics - a detailed account of the motives for (non) reporting and the vulnerability of public officials to corruption.

In closing, Mr. Woltring reiterated the need for highly intrusive techniques for combating such a consensual and covert activity as corruption. Nevertheless, he stressed that they should be subject to authorisation by an impartial authority removed from the persons immediately involved in the investigation.

Corruption in the administrative process

The session was chaired by Dr. Zvekic and included the presentation and discussion of four case-studies, two dealing with police and customs corruption and two with corruption in administration. Mr. Tom Sherman of the Australian National University and former Chairman of both the Financial Action Task Force (FATF) and the Australian National Crimes Authority, presented a paper on "Proactive Investigation: Australian Experience", and Mr. Woltring presented a paper on the UN Code of Conduct for Public Officials.

Six themes emerged from the presentations and discussions.

1. Corrupt networks: corruption is often not an individual act but rather a continuous illegal transaction process involving a number of actors. Where institutionalised, it corrupts the whole body or agency, which could then be seen as a corrupt enterprise.

Often investigation does not fully succeed because it tends to focus on single act(s) rather than on the corruptive links. It is therefore important that legislation provides for an opportunity to fully disclose the extent and scope of corrupt networks and that targeted investigative strategies are utilised to cope with them.

Other obstacles to the disclosure and breakdown of corrupt networks include:

·	lack of dedicated resources and special investigative units;
·	pressures to divert priorities to what are considered more urgent problems such as serious violent crimes; and
·	lack of effective international co-operation when the corrupt network involves one or more international components, even when the relevant countries are signatories to international conventions or treaties, such as mutual assistance in criminal matters treaties.

2. Corrupt networks are likely to develop in situations where mechanisms to ensure accountability and transparency in the decision-making process on allocation of resources and rights are inadequate. This is typical for corruption in the administrative process. On the one hand, strategies to promote accountability and transparency were mentioned as necessary conditions for the containment and prevention of corruption. On the other hand, a proactive investigation approach was suggested.

3. On the level of individual actors, reductive and/or preventive measures include improving the financial status of public officials, particularly those with a certain degree of discretionary powers with respect to the allocation of resources or permits and licences. At the macro level, certain governmental policies, such as excessive taxation of consumer goods (e.g. cigarettes), or the monopolistic position of producers and distributors of goods and services, are also conducive to illegal transactions, including simple bribery, as well as to the establishment of corrupt networks.

Other more specific issues included the following:

4. Concern was expressed about the emerging role of defence lawyers in terms of improperly obstructing criminal proceedings. Obstruction ranges from avoiding appearance before the tribunal to active participation in bribery (soliciting or receiving). However, it was recognised that the role of honest and professional defence lawyers is fundamental for the correct, fair and equal treatment of all parties involved in the proceedings. They also have an important role to play in preventing corruption by providing their clients with appropriate advice on how to avoid commercial or other types of transactions that are corrupt or conducive to corruption.

5. The presented cases and ensuing discussion revealed the importance of:

·	occasional excessive systems of immunity along vertical lines of judicial, political and/or administrative personnel which impeded effective prevention and investigation of corruption, both at the individual and organisational levels (e.g., sometimes immunity was extended as low as local councillors);
·	possible limited use of, and authorisation to use, specific investigative techniques and the use of the material obtained in evidence; and
·	the role of the mass media in disclosing cases of corruption, on the one hand, and, on the other, its possible negative effects during the investigative or adjudicative phase of criminal proceedings by inappropriate disclosure of the case and suspects, or by uninformed siding with suspects in corruption cases.

6. The role of independent special inquiry commissions and authorities on corruption was highlighted, particularly in terms of their effects on the prevention of corruption at both the organisational and individual level.

Corruption in the judiciary

Mr. Sherman chaired the session. Two cases were presented: one involved a judge directly soliciting a bribe for himself from a person charged with a traffic offence. The other case-study involved four persons: a judge, a prosecutor, a litigant company and an intermediary. The bribe was offered to the prosecutor by the judge acting as an intermediary for the litigant.

As in the case of the administrative officials, both case-studies disclosed that special procedures had to be followed, where approval was required to commence or continue the investigation and/or prosecution of judges.

In the Russian Federation, criminal investigations against judges have to be approved by a qualification's committee consisting of judges operating in the same area as the suspected judges. In this particular case, ten applications have been made but seven have been denied.

In the Czech Republic the prosecutors have to obtain the approval of the President of the Republic for processing offences committed in the exercise of judicial functions. Two or three cases have occurred in the last five years and permissions were granted.

During the discussion, it was reported that in Estonia, Hungary and Bosnia and Herzegovina (both the Federation and the Republic of Srpska) there are no special procedures to initiate investigations or prosecution of judicial corruption. In the other countries specific authority to approve or consent to the investigation and/or prosecution of judicial corruption is required. In Bulgaria, this is the Supreme Judicial Commission, while in Poland approval is required from the Ministry of Justice and Supreme Council of Magistrates. Ukraine has a procedure similar to that of the Russian Federation.

It was also recognised that whether or not any country should have special measures to approve the investigation or prosecution of the judiciary should be looked at in the country's historical context, but that clearly immunity should not be so wide as to permit corruption. The cases of immunities and/or special permissions thus raised important questions as to equality before the law.

Judicial corruption is a particularly serious form of public corruption. The citizen might be cynical about politicians and bureaucrats but public confidence in the legal system depends heavily on judges maintaining the highest standards of integrity and objectivity. Public confidence is undermined when judges engage in corrupt conduct and the major looser is, through lack of confidence, society itself.

Furthermore, judges are the guardians of the law. They decide on corruption cases and therefore play a crucial role in the fight against corruption. If judges are corrupt, or perceived to be corrupt by the public, anti-corruption measures will fail.

Corruption in the privatisation process

The session was chaired by Professor Savona. Before discussing cases related to the privatisation process, he presented a market perspective of corruption, according to which the phenomenon of corruption was considered the result of market forces such as demand coming from the corrupters and the supply provided by the corrupted. Assuming that both actors in this market aim at maximising opportunities and minimising risks (as rational men and women do), in order to be effective, anti-corruption strategies should be oriented towards reducing the opportunities for corruption and increasing the risks of being arrested or caught and thus damaging their reputation. In other words, anti-corruption strategies should deal with both aspects of the problem; prevention and control. One expert suggested that the participants should suggest to their authorities (such as Chief Prosecutors) the usefulness of this approach for improving current strategies.

It was clarified that the most rational criminals are those who commit economic crimes, who, given their rationality and the current situation, necessarily design more complex criminal schemes. Having considered corruption as a transaction among two or more actors the problem of definition arose. What really is corruption? Are the legal definitions satisfactory and comprehensive or are more extensive ones needed? The legal definition was considered as appropriate when it related to "any kind of benefits" in return for a corrupt activity. Another problem is that of private and public corruption discussed at the beginning of the Seminar. Is private corruption really "corruption", or should it be considered fraud? Is corruption a crime because it attacks the integrity of the public institutions or because it introduces distortions in the markets? Corruption is a generic word representing different types of crimes. Fraud could cover private corruption when, for example, an employee takes a bribe for doing something against the interest of the industry for which he/she works.

Three cases were discussed. The Hungarian case described a distortion in a tender procedure; the corrupter (a mediator) approached a bidding company and sold his influence as a public official over the Minister (the decision maker) who could influence the decision in choosing a tender. This is a typical case of trafficking of influence because there was no evidence that the Minister was aware that his "decision" was sold as a result of a corruption. A transaction consisting in a money transfer was found and used as the main evidence for the successful prosecution.

A discussion was focused on how it was possible to sell the decision of a Minister capable of nullifying the tender procedure. It was also recognised that unclear and non transparent tender procedures could produce opportunities for corruption. It is also possible that evidence might not necessarily consist in the transaction of banknotes. What would happen if this transaction had been done by a wire transfer into a foreign bank account? Probably, also in corruption investigations, as in the investigation of drug trafficking, some forms of controlled delivery would help to reconstruct the corruptive networks, especially now that corruption transactions are becoming more complex in the Central and Eastern European context.

The Polish case described corruption between a state official, the Director of a Department of the Ministry of Ownership Transformations, and the owner of a civil partnership. A percentage of a credit undertaking - the credit was never delivered - was requested and partially paid. Also in this case, the traffic of influence was the main feature of transaction because there was no evidence that the Minister was involved. "Connections" were sold in exchange for direct or indirect financial benefits and the rules of allocation of property rights were uncertain. The potential victims were led to believe that the discretionary power of the Minister would easily distort the criteria for the allocation of property rights.

The Czech Republic's case related to a bidding procedure for taking control of an industry. The bid was won by the company that had made the best offer but the entire procedure was nullified without any official reason. The representative of the company which had initially won the contract sued the State Property Fund of the Czech Republic whose representative contacted the company offering a direct acquisition of shares subject to payment of a significant secret commission. Numerous meetings were held before the matter was referred to the Police Service for the Detection of Corruption and Serious Economic Crimes.

Many indicators were involved and the complexity of the cases do not correspond to the simple way in which the bribery transaction had been carried out. The role of special unit of the Czech police was outlined.

PANEL ON TECHNICAL CO-OPERATION

The Technical Co-operation Panel identified roughly two levels of problems that need to be addressed in order to effectively construct an anti-corruption strategy: strategic obstacles and institutional obstacles.

Strategic obstacles deal with difficulties in approach to, and organisational activities in, combating corruption. The corrupt activity is often not an individual action but a continuous series of actions of a corrupt network. In addition to its latent nature, corruption in the rapid privatisation process makes investigation more difficult. Investigators may not be familiar with the regulations governing the privatisation process, which change frequently. They are required to trace intangible damage, often in the form of money transactions, rather than tangible damage, which requires special skills that investigators/prosecutors often do not possess. The intangible nature of the damage may lead to reduced political support to combat it in the face of the urgent need to solve more tangible crimes, such as homicide and robbery. Also, the historical difficulty for these countries in distinguishing between the private and public interests makes this even more problematic.

Institutional problems reflect current dynamic socio-legal changes in this region. Some participating countries have changed their legal framework in order to effectively fight corruption; others still rely on the conventional criminal law framework. Even for those countries which have introduced new corruption legislation, actual enforcement of such legislative frameworks may be a different question. Some countries lack operative rules and/or forces to enforce this "new" legal framework. Lack of specialised organisations or units to combat corruption as well as lack of co-operation among the different organisations and units are common obstacles. The excessive conferral of immunity on the judiciary and/or Members of Parliament, the problem of authorisation and control of the use of special investigation techniques such as wire-tapping and undercover agents and the lack of skill of the personnel using them are also common impediments.

Identified problems

It is possible to construct an itemised list of day-to-day obstacles in fighting corruption in participating countries. These can be categorised into legal obstacles, organisational obstacles, skill-related obstacles, information related obstacles, environmental obstacles and obstacles inherent in corruption itself.

Legal obstacles

Problems related to legal provision were most frequently mentioned. Needs to improve existing laws and procedures can be generic, such as an extension of anti-corruption law. Also, needs to fill in gaps among existing laws in the country might reflect the current situation of participating countries.

A more detailed listing of the obstacles includes:

·	Lack of provision to extend corruption to the private sectors and foreign officials;
·	Lack of provision to use wiretapping and/or electronic surveillance;
·	Lack of possibility to use evidence collected by electronic surveillance in the court;
·	Lack of possibility to use undercover agents;
·	Lack of witness protection and means of securing their testimony;
·	Inaccessibility to investigate/criminalise private banks, international transactions;
·	Lack of concept of corporate liability for corruption.

Organisational obstacles

·	Lack of co-operation between national agencies, with other countries  and with international organisations;
·	Legal provision fails to foresee inter organisational co-operation;
·	Lack of financial resources;
·	Low social status of criminal justice personnel;
·	Difficulty in recruiting competent personnel;
·	Lack of technical equipment to carry out special investigation techniques;
·	Lack of intra-organisational auditing;
·	Lack of, or problems in implementing, codes of conduct.

Skill related obstacles

·	Lack of professional skills and training (e.g. on financial analysis) for police, prosecutors and judges, especially for newly appointed judges;
·	lack of experience in enforcing newly developed legal schemes.

Information related obstacles

·	Lack of a good database and network for ensuring information exchange between the other country's agencies specialised in corruption matters;
·	Lack of general information on corruption strategies around the world.

Environmental obstacles

·	Lack of public awareness;
·	Lack of political support;
·	Extensive use of the immunity principle;
·	Inability to monitor the privatisation process, which is deemed a basis for corruption;
·	Bank secrecy;
·	Deficiencies in decision-making on allocation of resources, issuance of licences and permits.

Obstacles inherent to corruption

·	High rate of latency and clandestine nature of corruption per se;
·	Internationalisation of corruption.

Solutions for problems

The best ways to overcome such obstacles can be found once the problem is effectively identified. Several items are worth mentioning.

Solutions for legal obstacles

·	Assistance in reforming substantive/procedural law: alignment with international achievements and standards, cognisance of the other country's situation and provisions, catching up with reality;
·	Facilitate legal provisions so as to enable access to other national and international databases;
·	Provide adequate and effective sanctions for corruption;
·	Promulgation and implementation of codes of conduct.

Solutions for organisational obstacles

·	Introduction of co-ordinating body within the prosecutorial or other relevant office;
·	Establish specialised anti-corruption agency;
·	Establish co-operative agreement between agencies;
·	Establish auditing procedures and mechanisms;
·	Increased commitment for corruption investigation by the organisation;
·	Improve social status of personnel;
·	Targeted allocation of resources;
·	Refreshment courses.

Solutions for skill related obstacles

·	Training to increase professionalism in new concepts of laws;
·	Training and equipment for:

	database construction,
	electronic surveillance devices,
	personnel (general, for technology, financial analysis).