An art of catching a dark cat in a dark room

By Inna Rogatchi, special report from Frankfurt

The latter answer is most probably correct. There was no discussion around the issue in the country; even the law against corruption didn’t exist in the largest European economy. As soon as there have been no regulations, there was no violation either. Probably it’s really impossible to catch a dark cat in a dark room.

Fig: S. Tjulenev

What kind of transparency we talking about... 

Various German institutions and politicians put a lot of effort for acquiring adequate information and getting the draft law through German parliament. So to say, trying to switch on the light in the room, in order to see how many cats are there indeed. It has not been an easy task at all. Finally, after many years of efforts during the last decade, and two parliament elections, the law has been put for parliament discussion. But there is still a long way to go as companies proceed keeping their documentation classified and closed to public access. “What kind of transparency are we talking about then?” exclaims Reinold Thiel, one of the co-founders of Transparency International.

The situation with companies still keeping their activities closed from press and public has become very acute politically. Prominent members of the Green party, the closest and most important ally to German ruling social-democrats, have been even threatening to quit coalition if the new law on transparent companies activities, as it is in the rest of the civilized word, is not adopted. “A non-stop political battle is going on around this issue. We are now coming back to it for the third time, with a promise made by social democrats each time that “now we will make it”. We would like to hope that it would happen this time, finally. But if not, we will make our campaign really national-wide in its scale; and we have told that already to our political partners”, R. Thiel said.

Reinold Thiel, an editor-in-chief for Entwicklung et Zusammenarbeit magazine along with his partners on the issue has established recently a new journalists’ association called Network Researches. What would be regarded as a normal event in the European Community, and even in countries, which are not members of the EU yet, such as Poland, or Estonia, concerning establishment of an investigative journalists’ group was quite a novelty in Germany. “The fact is that Germany has not had an institute, neither a practice, nor a culture of an investigative journalism as it is known in the United States, United Kingdom, or Italy. Nobody even spoke on corruption here up to the beginning of 1990s. We do have good professionals in Der Spiegel and Focus magazines, but it is absolutely not enough to cover many different phenomena that are going on in Germany national-wide. We do not have investigative TV-journalism which is a very powerful and much needed tool; it is well-developed in many other countries, though much smaller than Germany, e.g. in Sweden, Norway, or the Netherlands”, explained Anna Pomian, a researcher at the well known and respectful Academy for Modern Politics named after Hanns-Seidel-Stiftung.

The simple fact that German companies have had a privilege to keep their activities and documentation undisclosed both to press and to public, has made it virtually impossible for journalists and experts to provide room for investigative journalism, and to bring companies’ activities to the light of the public discussion. “It was just impossible to work in the area that was known as investigative journalism”, said Kasten Lohmeyer, one of the very few German journalists working in this field. He is at the same time the author of a recent book titled “Net of Corruption”, quite a title for “a non-existing phenomena”. The book in its large part is the history of Transparency International.

Kasten Lohmeyer said: “You cannot imagine how much effort and time a journalist in Germany needs in order to get any company’s documents or to discuss some issues with companies’ officials. Business is completely covered by law, and as soon as you are not allowed to see any documents, how can you make a story? Time after time you would call them, visit them, try to talk to them, and time after time they would maintain that law allows them not to disclose their activities, nor discuss or speak about any documents. Law protects them; that’s it. The case was closed – not even being started. And the worst thing that nobody knew what was going on either in the government, or inside companies. Complete darkness.”

K. Lohmeyer and his colleagues explained that most information about corruption activities in German companies Transparency International and German press acquired from abroad, in the countries where participation of some of the German companies in corruption activities has become known and even prosecuted. “It was the only way to get to know about it, and to get some documentation released in connection with those definite cases. But nobody knows what is going on inside Germany. We have a real problem here as companies claim that every piece of information is confidential”.

The corruption-breeding atmosphere in Germany was at such a fruitful level that according to another law valid until 1999 bribes that German companies paid to foreign companies were tax-deductible. It took a lot of time and efforts to adopt a new law forbidding such a widespread practice. But as various German experts pointed out “if you were doing something for many decades, it was not so easy either change your entire practice, your business mentality, nor the moral or habits during just a couple of years”.

Propulsive force of anti-corruption professionals

In case of Germany, one of the most interesting and peculiar things was the fact that representatives of the business community themselves decided to bring the matter of corruption to the public spotlight. As Transparency International biographer Kasten Lohmeyer described, the initiators of the idea and the founders of the organization, (such as Dr. Peter Eigen, Dr. Michael H. Wieden, and others) were actually quite wealthy top businessmen working in the World Bank, other international institutions, or leading top companies. “In fact, they were not forced to do it (to set up Transparency International), – said Lohmeyer. – Establishing an organization with the main purpose to make business and government activities transparent, they would act purely on moral grounds. Each of them will tell you numerous stories they were witnessing worldwide while working in Africa, Latin America, and Asia or anywhere in the world. And by 1993 they felt so sick and indignant with what they have been witnessing that they decided to retire and start some real anti-corruption activities creating a productive dialogue with all participants within the process.” 

The pressure exercised by the United States was another impetus driving actions against corruption in Germany, experts revealed. “The US was quite angry with the fact that corruption was in fact so widely accepted in Europe – how else would one qualify a situation where a bribe is tax-deductible! In the US it has been regarded as a national strategy to fight unjust privileges in the international business competition because such practice in German and other European companies, e.g. France violated international competition regulations. The US massive pressure has contributed to intensive international efforts in the recent Germany’s “awakening” concerning the issue of corruption”, Anna Pomian acknowledged.

Anti-corruption prosecutor of “the whole-nation”

In line with quite a few “investigative journalists” in Germany,

Wolfgang J.Shaupensteiner, photo: the BC arhives

there are even less law-enforcement authorities in charge with anti-corruption activity in the country. Public prosecutor Wolfgang J. Schaupensteiner is regarded a leading anti-corruption professional both by experts and by the public.

Schaupensteiner’s office in Frankfurt is a rather discreet one as it represents a Special Task division. The Frankfurt division of the Anti-Corruption Special Task Force has been established for the first time in Germany in 1993, the year when Transparency International was created. It has to be mentioned that leaders in Transparency International highly appreciate prosecutor’s Schaupenesteiner’s work.

This tall, movie star looking and truly professional prosecutor is a very busy man, while he has just four officers assisting him when he needs “at least ten”. A small number of other police officers render assistance to the anti-corruption Special Task Force when needed (in raids, searches, seizure of documentation, and undercover work). Listening to the prosecutor’s description of his work and cases one has a feeling of being inside a truly good and genuine German TV’s police-series. 

The first case that was investigated and prosecuted by Mr. Schaupensteiner and his team was at the same time the very first anti-corruption case in the history of Germany. And it was quite a case: more than one thousand city employers, the whole staff of a department in the city municipal authority have been prosecuted, found guilty and convicted for a massive embezzlement of the public money that had been practicing during late 1980s. “How many people were working in that department if as much as more than one thousand of them were put behind the bars?” In the answer to this question Mr. Schaupensteiner said, “precisely the same number; all of them were behind the bars; and it has lead to new elections for the city municipal authority”. 

Quite remarkable that a small detail can always help to make a good story, and not only in the movies. Prosecutor Schaupensteiner remembers how this case started that literally shook Germany. In a course of a routine investigation of a builder contractor charged with an embezzlement case, among various evidences police found during the search at the contractors’ apartment a small note, just a small piece of paper with several names on it. When asked about the names the contractor said that he had to pay bribes to certain people. The names, precise amount of bribes and dates when money had been handed, all was recorded. “I did not steal money from my company, said contractor, I had to pay these bribes in order to get contracts from the city officials!”  The chain of corruption was really quite a big one, which Mr. Schaupensteiner characterized as “a real domino effect”, i.e. it took several years up to 1997 to investigate and prosecute the whole case. Many people have been sentenced with the highest imprisonment term of 7 years, with various other penalties and expulsions from offices. 

Nothing of the kind has ever happened in Germany before. After the case the notion of corruption has been regarded as a serious problem in the country. Maybe for that reason alone Wolfgang Schaupensteiner’s extraordinary popularity has grown to the level of the whole Germany’s anti-corruption prosecutor, while in fact his authorities were limited to the city of Frankfurt only, not even within Frankfurt federal land Hessen. The prosecutor regrettably acknowledged this fact, as it placed many irritating obstacles to his work, e.g. the fact that his important anti-corruption Special Task Force did not have a nation-wide network and importance. So far there are only branches in several cities, such as Munich, Dusseldorf, Berlin, Hannover and Kiel. “Obviously, it is not enough for the situation we are having at present”, said Mr. Schaupensteiner.

The “gray zone”

As the main problem the prosecutor regards the inadequate law on corruption. “Such legal holes would allow that about 95% of all corruption connected crimes had never become disclosed. And this is my very optimistic assessment” he smiles ironically. But there are some steps undertaken recently which Schaupensteiner and his colleagues characterize as “revolutionary” for the country. Among those measures is mandatory information on tax evasion that Treasury Department is obliged to provide now to the anti-corruption Special Task Force. “There were decades after decades that the companies were accountable for in their outside and inside activities. Audit checks that were supposed to be conducted annually were taken only once in five or ten years, and were regarded as classified documents inside the companies. A huge amount of so-called “consultant contracts” which were an euphemism for bribes being business practice rule by German companies. It is impossible to calculate how many people must work round o’clock for how many years to investigate all such “consultant contracts”, said the prosecutor. As one of the most serious problems the German anti-corruption Task Force sees the widening international corruption activities all over the European Union member states. This is a very worrying signal and a really serious problem we have to deal with as quick as we can; and the first thing to be done here is the EU-coordinating anti-corruption body”.

As a sign of a general positive change, in Schaupensteiner’s mind is the fact that in 1999 Germany signed and ratified International Convention against Bribes and Corruption. After ratification Convention has become a part of German law. “But in reality too many companies do not know about this fact or pretend not to know.

And almost all cases of corruption practicing by those companies pretending not to know occurred on the international level by the companies concerned. It is always easy to explain the corrupt activities by “local conditions” but it is always more difficult to get a proper information and documentation from abroad, especially in cases in Africa or Latin America. However, as soon as we establish a case, we prosecute a person giving bribes and not those receiving them. And it gives a lot of thoughts to those German companies who prefer not to know about this law’s existence”, says the prosecutor.

Frankfurt division’s head of the German Anti-Corruption Special Task Force has also emphasized that “in 95% of cases the benefits from giving bribes turned out to be an advantage for German companies or persons who were giving bribes”.

Describing so called German corruption model, particularly in its international dimension, Schaupensteiner explained that “besides unrealistic and often fictional commission paid for negotiating deals (often it hid already a well-established route of bribes), German companies or concrete persons were receiving enormous, and completely illegal profits from fixed selling prices between two sides; and often these prices have been 4–5 times higher than it should have been in reality.

Price for a friendship with a dictator

“To pay for a friendship connections with a certain dictator who would allow you to work in his country without any competitors at all, some serious and well-known companies regard quite acceptable for them to buy luxury presents for dictator’s entire family and entertain them in the most expensive places, even build villas for them somewhere in the Alps. And to be at the same time a contractor for the dictator’s “cosmic building plans” back home. And such company knows quite well what it is doing for the price of building stadium, or some other public object that dictator announced, one can build not one but ten of them!” And whose money is it? The World Bank or IMF’s, or another international institution so enthusiastically providing aid to African or Latin American countries. No wonder that African continent stays desperately poor since it has gained its independence, half a century by now. But the peculiarity of it is that during all those years the international institutions did subsidize not only African or Latin American dictators and their cronies but respected German and other civilized companies as well. But only now their activities seized to be completely unknown, and some have been even under investigation.  

In the process of a very famous although not yet completed investigation over a massive sale of German tanks to a South Arabian country it turned out that “although the real value of tanks was 80 million German marks, Arabian government paid German government (headed then by Helmut Kohl) as much as 450 million. The question comes: what happened with money’s difference? Where is this enormous amount of money? We are talking about just one deal, and there have been much more than one such deal! We have found out that some money went to the slush fund, and the person in charge with it was extradited on our behalf and he is under the trial at the moment. But the problem of this very crucial case, and several others, is that it must go much wider than investigation of just one-man activities. It is clear that he did what he did as a part of a large agenda; and our task is to find out and tell the public about it. It is a very uneasy thing to do, but I can assure you that there are quite a few highly interesting cases on my desk at the moment, and the first interrogations have been conducted already. And this is only the beginning”, assures the leading German anti-corruption prosecutor, with a rather telling smile.

(c) Rogatchi Productions & Communications Ltd., 2003