No link between organized crime and high oil prices

Organized crime figures may have infiltrated global energy markets, as US officials noted when unveiling their new strategy to fight organized crime last week, but organized crime’s involvement is not to blame for rising energy prices, Reuters reported on Saturday (April 26).

“I don’t think that you can directly link the two,” said Alice Fisher, the head of the US Justice Department’s criminal division. “(But) we want our markets to be run by legitimate businesses and legitimate investors. And when you have these people that are engaged in multimillion-dollar fraud and other illegal activities, coming into our markets, whether it be the energy or any other sector, it has the opportunity, and a corrupt opportunity, to threaten the stability and transparency of those markets.”

The new strategy for fighting international organized crime was based on a still-classified threat assessment, which reckoned that criminal groups controlled “significant positions” in energy markets and other markets of other materials deemed vital to US security. Perhaps now with US gasoline prices averaging at $3.60 per gallon (boo-hoo America, Europeans have been paying some $6 per gallon for as long as I can remember), I suppose it’s a legitimate question.

And interestingly enough, Reuters also reports in the same article that the Department of Justice has not sought any additional money under the new crime-fighting strategy. “Officials said the department was still evaluating the need for any future policy of legislative changes,” the wire service reported.

Organized crime, corruption not helping Afghanistan’s economy

Organized crime, kidnappings and killings are hardly bonuses for any entrepreneur thinking of opening a business in Afghanistan, but add the costs of doing business (paying bribes, paying dodgy taxes), and throw in the sketchy electricity situation, and you get Afghan entrepreneurs either heading for Dubai or closing shop altogether, writes the Financial Times Deutschland.

The article, published just two days before Afghan president Hamid Karzai escaped another assassination attempt on April 27 (he’s escaped three earlier attempts on his life), focuses on the lawlessness in the country that’s driving out business. The country’s chamber of commerce has a list of 30 recent attacks on businesspeople or their families, and noted that several children have been killed.

Besides the violence, businesses are often asked to pay taxes that later turn out to be illegal, and often find themselves paying thousands of dollars or more in bribes.

One leading international logistics company came close to pulling out of Afghanistan last year after it discovered it had been paying taxes to the Ministry of Communications - technically illegal because only the Ministry of Finance is allowed to raise revenue. ..A western official, who declined to be named but has worked closely on tax reform issues, said the "cheques had been made out to the ministry of post, which doesn't exist, so God knows who actually got the money". He estimates the cost of business is at least twice the official amount after bribes, corruption and taxes of questionable legality are included.

These problems have already taken their toll on Afghanistan. The article points out that the private sector is so limited that one restaurant in Kabul that caters to the expatriate crowd is among Afghanistan’s top 100 taxpayers.

Corruption = Cash

Maybe what Afghanistan and other places need are more foreign consultants to investigate corruption. It’s already a booming business, according to the Washington Post.

Thirty years after the US passed the Foreign Corrupt Practices Act (FCPA), lawyers and consultants have got into the act – of advising companies on how to stay in the clear when they open offices abroad, and offering legal counsel if they do get into trouble – in a big way.

FCPA business is … a welcome growth area for Washington law offices just as work on mergers and securities offerings has begun to wane. You can't go into a business class lounge at the international terminals at Dulles Airport without running into at least one lawyer headed to Europe or Asia to conduct an internal investigation of a possible bribe or kickback for a corporate audit committee. And law firm Web sites now boast entire practice areas devoted to advising multinational companies on how to design and implement compliance systems meant to deter and ferret out corrupt practices.

Investigative firms, risk consultancies, accounting firms, and forensic computer specialists are also cashing in. To get an idea of the kind of money involved, the article points out that New York law firm Debevoise & Plimpton has billed Siemens $100 million for its work on the company’s corruption probe. Other internal probes of this type range in cost from $1 million to $20 million.

Why is this happening? The Post’s columnist says that as business has grown global, companies end up opening offices in countries in which bribery is either accepted, or is the usual way of doing business. There’s also been more enforcement: Thirty-eight cases were brought in 2007, compared to around 10 in previous years. (The Department of Justice and the Securities and Exchange Commission are the agencies that enforce the FCPA.)

Whistleblower faces job loss over exposing his boss

A British whistleblower may be canned from his job at a European Union-funded aid agency for exposing an alleged conflict-of-interest problem with his former boss.

The Sunday Times reported April 27 that Terry Battersby of Manchester has been removed from his position as head of information technology at the Center for the Development of Enterprise in Brussels and put on short-term contract, after he uncovered evidence that the CDE’s former director had awarded EU contracts to a company in which he had a financial interest.

Hamed Sow, who’s now the energy minister of the west African country of Mali, is alleged to have arranged for the CDE to back a loan of nearly $6 million to a textile company in Mali – a company of which he owned up to 20 percent and from which he was receiving payments. (The CDE supports the private sector in poor countries and receives more than $28 million in EU taxpayers’ money every year.)

Battersby discovered documents that showed Sow’s apparent conflict of interest two years ago, and passed them to the EU’s antifraud investigators; now, after 16 years with the CDE, he’s on a six-month contract.

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