In pursuit of International Transparency (January 1997)
Recently the New York Times published an article expounding the merits of a new organization called Transparency International for its efforts in seeking to eliminate corruption and graft as every day tactics in the assignment of international trade contracts. In citing examples of corrupt politicians on the international scene, journalist Paul Lewis, alluded to Benazir Bhutto of Pakistan, Fernando Collor De Mello of Brazil, both former Korean Presidents Chun Doo Hwan and Rho Tae Woo, and former Italian Premier Silvio Berlusconi. Although I would hardly argue against the meritorious efforts of Transparency International, I would beg to differ with using one of these political leaders as a case of reference.
Since the passage of the Foreign Corrupt Practices Act in 1977, American corporations have been losing billions of business dollars every year since the law prohibits U.S. companies from practicing bribery in order to acquire foreign contracts. While prohibiting such practices is certainly praiseworthy, it has left American companies with a deck stacked not exactly in their favor since many other countries look upon such practices as normal modus operandi. It is more often a payoff rather than a lower proposal that makes the difference in closing a deal.
Peter Eigen, founder of Transparency International, left his position at the World Bank to dedicate his efforts to this new agency in order to fight growing corruption in developing countries. His group and the policies of the Clinton Administration have been instrumental in instigating many hallmark turnarounds in the operating policies of many international organizations which are responsible for raising development funds. The World Bank, the Organization for Economic Cooperation and Development, and the International Monetary Fund have all begun scrutinizing requests for funds and blacklisting those companies and governments which have been found guilty of large-scale graft practices.
The case I dispute in Mr. Lewis’s list of offenders is that of former Italian Premier Silvio Berlusconi. First of all, he was not forced to resign amidst corruption charges as Mr. Lewis indicates in his article. Although Mr. Berlusconi had been charged with corruption, this was not the reason for his resignation. He was forced to resign because one faction of his political coalition, the by now infamous secessionist group, the Northern League, stopped supporting his government. In truth, Silvio Berlusconi continues as president of the party, Forza Italia, and as leader of the coalition group, the Liberty Pole, which stands in opposition to the present government. His coalition group actually won over 100,000 more votes than the now governing center-left Ulivo coalition in the last national elections in April 1996. It is only due to a new law which breaks up the ballot count creating an anomaly similar to our electoral college system that Silvio Berlusconi did not become Prime Minister again. (See Island Reporter, May 3, 1996, The Italian Elections: A Communist victory.)
As for those corruption charges, if anything Mr. Berlusconi’s company was a victim of the extortionist methods that had become common practice for the state tax auditors in order to round out their own salaries. (See Island Reporter, February 9, Bribery is an every day affair in Italy and February 16, Misuse of Power in the Italian judicial system.)
If Mr. Lewis had been truly eager to employ an Italian example to make his point, it might have been more opportune for him to use the present Italian Prime Minister, Romano Prodi. Recently Mr. Prodi has received a number of first citations that would involve him in malpractice concerning the sell-off of many state assets.
For many years Prodi was head of the state financial holding IRI whose task during these most recent years of privatization has been to sell state assets to the private sector. The latest citations against him involve charges of misconduct concerning deals made with the Cirio food manufacturing group. However, it should not be forgotten that Prodi was also head of IRI during the famous Ford/Fiat duel in the battle to purchase the former state-owned Alfa Romeo in 1987.
Fiat had originally expressed no interest in purchasing the state-owned automobile company. The very night before Ford was to sign the contract with Alfa Romeo, IRI’s Romano Prodi phoned Fiat’s Cesare Romiti informing him that the deal with Ford had been concluded. The next morning Fiat put a firm halt to the deal. Evidently, the company found discomforting the thought of having to deal with any in-house competition. As it stood then, by acquiring both Lancia and Alfa Romeo, it held a monopoly on domestic car manufacturing and 60 percent of the national market share, more than twice the amount of domestic market share control of most other Western industrialized nations.
There is still a great deal of controversy surrounding the issue since it is generally believed that Ford by far had made the better offer. Authorities in Brussels, suspecting foal play, opened up an investigation. One of their suspicions was that in postponing payments until the 1990s, the Italian government had effectively reduced the purchasing price for Fiat, an overt violation of EEC rules. Almost ten years later Fiat has yet to provide Brussels with satisfactory information. Nor has it respected the payment terms for that matter! American author and "Financial Times" correspondent, Alan Friedman, dedicates an entire chapter of his book, "Agnelli and the Network of Italian Power" to the Alfa affair.
Perhaps this example more than any other represents the kind of underhanded manipulation that Transparency International is seeking to eliminate, both for the sake of fairness among competing companies and for what payoffs or the acceptance of less advantageous offers means in terms of cost to taxpayers as opposed to inflating private Swiss bank accounts!
Mr. Lewis’s piece was highly informative in relating the efforts of Transparency International to persuade international agencies to be more cooperative in combating this invasive and injurious international dilemma. It is unfortunate that he should mar such an illuminating article with an overly simplistic example bearing questionable truth.
January 1997
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