East Europe Corruption Cited

Corruption is on the rise in many European countries, noted a year-end report from a federal agency that acts as a security go-between for the US State Department and US business interests abroad.

The Overseas Security Advisory Council’s annual report warned US businesspeople abroad about maritime piracy, terrorism and drug cartel violence in other places, but singled out Russia, Ukraine, Bulgaria and Romania for corruption.

A series of political and business scandals over the past year raised concerns among OSAC constituents that corruption in many European countries is on the rise. Contributing factors in certain countries include: a declining economy fueling crime rates, pervasive influence of organized criminal groups on markets and governments, and limited rule-of-law. InEastern European countries such as Russia, Ukraine, Bulgaria and Romania, OSAC constituents expressed particular concern over corruption and increased difficulty maintaining compliance with the Foreign Corrupt Practices Act due to greater insistence on bribes for contracts and permits. Problems were particularly evident in Russia, with on-going concerns about “corporate raiding,” the takeover of businesses by dubious means, including misuse of government agencies by government and non-government actors, and those connected with criminal organizations.

The Bulgarian press listed the report’s concerns about bribery in that country.

Many US companies' representatives complained that the authorities in certain Eastern European countries have been overly insistent on getting a "commission" for their service and in case of a decline would reject contracts or refuse issuing clearances.

Bribery isn’t the only pitfall to doing business in Bulgaria. Police tied to organized crime – as we saw last year when Bulgarian Interior Minister Rumen Petkov resigned over ties to organized crime figures – is another. Last week, the police chief in a town about 40 miles southwest of the capital Sofia was fired and accused of mob ties. He was fired over ties to two Bulgarian businessmen – the same so-called “Galev brothers” that the interior minister had been under fire for meeting. (Here is a photo of one half of the brotherhood, speaking to the press after his “brother” was detained last month on suspicion of extortion.)

Sources close to the Bulgarian Telegraph Agency have said that the dismissal took place because it became common knowledge that local authorities have engaged in a dubious relationship with individuals from the criminal underworld, Dnevnik daily reported.

(Police chief Chavdar) Karadjov's name began to circulate in the Bulgarian media when on October 15 2008, state authorities initiated a massive raid on second-hand car dealerships and other businesses in Doupnitsa, supposedly linked to the “brothers”.

Austrian Banker Disappears

It was only a matter of time, said some financial analysts, before Russian oligarchs would find themselves burned not only by the worldwide financial upheaval but also by the revelations that Bernard Madoff’s high-return-investments-for-elites were in really a giant Ponzi scheme. Last week the New York Times discussed the ultra-low-profile of Sonja Kohn, who collected Russian and European investors and money for Madoff’s scheme:

Embarrassment from investing heavily with Mr. Madoff could explain wanting to disappear from public view. But another theory widely repeated by those who know Mrs. Kohn is that she may be afraid of some particularly displeased investors: Russian oligarchs whose money made up a chunk of the $2.1 billion that Bank Medici invested with Mr. Madoff.

“With Russian oligarchs as clients,” said a Viennese banker who knew Mrs. Kohn and her husband socially, “she might have reason to be afraid.”

Georgia Get Anti-Corruption Agency

Georgia has created a new agency to make that country’s anti-corruption policy, according to the Georgian Times. The agency will also fight corruption and, according to the article, “work out an action plan of Georgian anti-corruption strategy restoration and its implementation and monitor its implementation.”

Energy: Kosovo Corruption Forefront

Student-and-scholars-run website New Kosova Report last week ran a lengthy Q&A interview with the leader of Kosovo’s most prominent anti-corruption organization Cohu (pronounced CHO-hoo, it means “stand up” in Albanian). Avni Zogiani does an excellent job of explaining the lack of accountability in Kosovo that leads to corruption and what’s going on right now.

NKR: What are the most problematic areas right now?

Zogiani: I believe the sector of energy is already becoming the forefront of corruption and involvement of organized crime. Until now the mobile telephony market was sort of the champion of political corruption. The process of privatization was also flawed due to political influences, but the corruption in education and especially so in the private sector has taken hilariously vast proportions.

It’s a long interview, but worth reading for Zogiani’s detailed answers and examples, and his blunt assessment of the ability of the international community to fix corruption.

Data Breaches up by Half in US

Bad news from the data-integrity front: The information of nearly 36 million Americans was compromised last year, as businesses and other organizations reported almost 50 percent more data breaches in 2008 than they had the year before, according to a report from a nonprofit group that fights identity fraud. The Washington Post had the story last week:

Identity Theft Resource Center of San Diego is set to announce today that some 656 breaches were reported in 2008, up from 446 in the previous year. Nearly 37 percent of the breaches occurred at businesses, while schools accounted for roughly 20 percent of the reported incidents.

The center also found that the percentage of breaches attributed to data theft from current and former employees more than doubled from 7 percent in 2007 to nearly 16 percent in 2008.

"This may be reflective of the economy, or the fact that there are more organized crime rings going after company information using insiders," said Linda Foley, the center's co-founder. "As companies become more stringent with protecting against hackers, insider theft is becoming more prevalent."

The FBI is on the job, according to an interview last week with the Feds’ so-called “human firewall.” Newsday spoke to Shawn Henry:

To combat computer crime, the FBI uses informants and agents to infiltrate computer-crime rings and also makes alliances with police agencies around the world to work against both terrorist and ordinary criminal hackers, said Henry and his chief deputy, Christopher Painter.

In theory, the infiltration technique is the "same as infiltrating organized crime in this city," Henry said, referring to the past arrests of the leaders of the five traditional organized-crime families in New York.

ITALY NEWS

One of the most powerful men in Italian football received an 18-month suspended sentence last week over the corrupt transfer of players, while his son received 14 months in his role in GEA World, the football management agency they ran together. Luciano Moggi, who was the general manager of the Juventus club until he was banned from the sport for five years over a match-fixing scandal in 2006, will not do jail time, because evidence against him came out at a time when an amnesty had been declared in Italy – though he was found guilty of using threats and violence to make players sign with GEA World and with certain teams to ensure that Juventus would win.

In organized crime news, police in Lancashire – a county in the northwest of England – told the Independent last week that they were investigating a group of men with links to southern Italian crime groups.

The Independent understands that a dossier of intelligence accumulated over 18 months by British detectives has been sent to their Italian counterparts about five individuals living apparently innocuous lives in towns and villages across Lancashire. It is understood the investigation relates to offences committed abroad, suggesting that a corner of England more commonly associated with the capers of Wallace and Gromit is being used as a bolthole by professional gangsters operating at the "highest level" of organised crime.

The revelation follows the arrests of Giuseppe Persico and Gennaro Panzuto, both 34, who were alleged to be senior members of the Camorra – the Mafia network that operates around Naples and which is blamed for causing the crisis with uncollected waste on the city's streets through its control of the refuse business. The two men lived 30 miles apart in Lancashire. Panzuto, the head of a powerful clan within the Camorra, fled a feud with a rival clan which had resulted in the deaths of 20 people to live in Catterall, north of Preston. Persico, who was working for a removal firm and lived in Chorley, south of Manchester, was arrested at Faro airport in Portugal on drug-trafficking charges in October last year and was subsequently extradited to Italy.

Mexico: An Online Judiciary?

In a new system that could be used by other countries with heavy crime, Mexico has authorized a half-dozen judges to respond online and within 24 hours to police requests for search warrants, arrests and telephone taps. The country’s attorney general said the new system will not only speed up the request results, but also keep those requests confidential and give the judges some much-needed anonymity.