Dutch Won't Open Old Lockheed Wound

The leader of the Dutch government has refused to open a new investigation into the role played by Prince Bernhard in the Lockheed scandal that broke in 1976.

The head of the left-wing liberal D66 party, Alexander Pechtold, asked for 'a commission of historians . . .  to bring clarity to the affair after historian Gerard Aalders said Bernhard's involvement was greater than so far thought,' according to DutchNews.

Prime Minister Mark Rutte told Parliament last month he won't authorize a new inquiry.

Bribery scandals involving Lockheed in Holland, Japan, and Italy helped push Congress to enact the Foreign Corrupt Practices Act. President Carter signed the FCPA into law in December 1977.

DutchNews said the Lockheed scandal 'nearly led to the abdication of then Queen Juliana when it broke in 1976. Bernhard had to renounce his military functions in exchange for judicial immunity for taking a $1.1 million bribe from Lockheed fifteen years earlier. He died in 2004.'

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To read more about the FCPA's legislative history, see Prof Andy Spalding's Beyond Balance series.

Readers Respond To 'Graft And Debt'

Earlier this month, we asked if a country's perceived graft can predict its sovereign debt problems, mentioning that Greece ranks worst in the Eurozone on the corruption perception index. Next for the dunce chair, we said, comes Italy.

The next day, as if on cue, the Dow fell 389 points because of the Italian job.

That brought a few comments our way.

One reader said our correlation between graft and debt was clever, others called it fiddle faddle (we thought of it as clever fiddle faddle, so everyone was right).

But a reader with a more serious turn of mind had this to say:

Regarding graft as a predictor of a country's debt trouble, I think there probably is a relationship with their CPI score. It may be that large amounts of debt and perceived fiscal irresponsibility lead some people to assume the problem is due to corruption (as opposed to mismanagement or bad policy decisions) which then negatively effects their score. More debt leads to more allegations of corruption = lower CPI score. Perhaps the Irish are just more forgiving.

Whether graft causes debt problems, or whether debt just looks like graft, we don't really know. But we say again, corruption is never a victimless crime.

Does Graft Predict Debt Woes?

This may be cheap science. But take a look at the seventeen Eurozone countries according to their rank on the 2010 corruption perception index.

Greece is perceived as the most corrupt country in the Eurozone. Its debt crisis has threatened the EU for months, hammered the international banking sector, and roiled world stock markets.

Just when the Greek debt problem was looking better, attention shifted to Italy. Predictably, it ranks next to last of the Eurozone countries according to the CPI.

Then come Slovakia and Malta -- not yet major economies -- followed by Spain and Portugal. Both are mentioned as the next potential sovereign-debt trouble spots.

Ireland breaks the mold, ranking near the top on the CPI but being a Eurozone laggard.

We're not making too much of this. And it doesn't mean clean countries can't run into debt problems. But perhaps there's a link between regimes perceived as corrupt and a messy handling of their fiscal affairs.

Here's the list of Eurozone countries with their CPI rank in parentheses:

1.  Finland (4)

2.  The Netherlands (7)

3.  Luxembourg (11)

4.  Ireland (14)

5.  Germany (15)

6.  Austria (15)

7.  Belgium (22)

8.  France (25)

9.  Estonia (26)

10.  Slovenia (27)

11.  Cyprus (28)

12.  Spain (30)

13.  Portugal (32)

14.  Malta (37)

15.  Slovakia (59)

16.  Italy (67)

17.  Greece (78)

By the way, Turkey -- a Eurozone wannabe -- ranks 56 on the CPI. That's near the bottom of the list of current members.

The Enforcement Gap

By Nancy Z. Boswell and Robert N. Walton, Transparency International-USA

Transparency International’s sixth annual report on enforcement of the OECD Anti-Bribery Convention, released last week, paints a mixed picture. On the positive side, it shows active enforcement in seven of the 36 countries evaluated, including the U.S, Germany, Italy and Norway. The U.K. even made the cut, despite the disappointing news last month that it is postponing the implementation of its sweeping new Bribery Act until April 2011. 
 
Far less encouraging is the report’s finding that there is only moderate enforcement in nine countries and little to none in the remaining 20. This latter undistinguished group represents 15% of world trade and includes G8 members Canada, Japan and France.  
 
The numbers speak for themselves, but the underlying question is why, after a dozen years, so many governments that committed to criminalize the use of bribes to get business have failed to live up to that promise. One can only conclude many of them have decided that it is not in their economic interest to do so. Motivations may vary, but these governments may see greater value in promoting the international commercial success of their country’s enterprises. If that means ignoring the Anti-Bribery Convention, so be it.
 
This disheartening conclusion is ominous for the countries where bribes continue to be paid, and for fair competition for those who observe the rule of law. There can be little doubt that inconsistent enforcement will allow bribery to continue unabated and may well undermine support of those countries that have followed their commitments with action. Likewise, it will hinder efforts to ensure that important emerging exporters –- notably China, India and Russia –- agree to and impose foreign bribery constraints on their companies. 
 
Given the serious and damaging consequences of bribery in countries that can least afford it, the OECD, the governments that are complying with the convention, and those of us in the anti-corruption movement need to put more pressure on lagging countries to step up to their commitments and actively enforce the convention. Time is running out.

Nancy Boswell is the President and CEO of Transparency International- USA (TI-USA) and a former member of the Board of Directors of Transparency International (TI). She can be contacted here.

Rob Walton is TI-USA's Senior Policy Director for Private Sector Initiatives. He can be reached here.

Medical Ghosting And The FCPA

The debate about medical ghosting has focused on the U.S. market. But could the DOJ and SEC now be looking at the practice overseas, where it might violate the FCPA?

Main Justice reported that in April, the DOJ and SEC sent letters to AstraZeneca PLC, Baxter International Inc., Eli Lilly & Co., and Bristol-Myers Squibb Co. The letters asked about business practices in Brazil, China, Germany, Greece, Italy, Poland, Russia, and Saudi Arabia.

Medical ghosting works like this. Drug companies hire outside firms to draft articles touting a drug, then retain a doctor or scientist to sign off as the author. The drug company then finds a publisher, who doesn't know the article was written by someone other than the person who signed it.

Doctors and scientists eagerly participate because publication credit increases their prestige and professional standing. And the drug-companies use the medical journal articles as "independent" proof that their drugs are safe and effective.

A Senate report released last month and quoted in the New York Times said: “Manipulation of medical literature could lead physicians to prescribe drugs that are more costly or may even harm patients."

The FCPA's antibribery provisions prohibit among other things (1) the giving of anything of value (2) to a foreign official (3) to obtain or retain business. See, e.g., 15 U.S.C. §78dd-1(a) [Section 30A of the Securities & Exchange Act of 1934].

Ghosting has those elements. Giving a doctor or scientist an unsigned manuscript for publication has real value. Doctors and scientists working in government-owned or managed hospitals overseas are "foreign officials" under the FCPA. And articles appearing to independently endorse a drug help its manufacturer obtain or retain business.

We don't know if medical ghosting will figure in any FCPA-related investigations of the drug companies. But it could.