Unethical practices in the public sector

The word "corruption" means the abuse of public trust for private purposes. It is a moral phenomenon, even though money is involved in the vast majority of cases. A public office is used for the benefit of one or more individuals, rather than in the national interest. Corruption may exist independently of any financial benefit; it is universal and multiform, and exists within non-governmental organizations. There are several definitions of corruption in existence but it can be said simply that corruption means the abuse of an office for personal ends. This office may be public or private but corruption is usually regarded as a public phenomenon. An individual abuses the public confidence placed in him to serve his own interests or those of the group to which he belongs. To understand the many forms of corruption, it is first necessary to consider the nature of the situations and persons concerned: civil servants, businessmen, private individuals or companies using the same processes. The external factor intervening in the decision-making process influences the unwarranted benefit to the decision maker or executive in the form of a gratuity or the promise of a gratuity.

Corruption affects all sectors of both public and private economic life. The existence of a public sphere and a private sphere is a prerequisite for corruption, but certain differences can be observed in the interests pursued. A businessman, working within the law, who slips an inducement across the table is generally pursuing an end corresponding to the interests of his company. The act – though reprehensible – thus comes within the framework of the normal operation of the enterprise. This is also the case of the politician who, in his own interest or in that of his party, tries to cover up a financial scandal but cannot do so without the help of other persons whose action or inaction he purchases. Another area very propitious to corruption is nepotism. This is a phenomenon extremely difficult to pin down but, since the criterion of competence has been replaced by that of favouritism, it creates between the decision maker and the beneficiary of the decision a link of dependency which may well influence future decisions.

The corrupted and the corrupter are not accomplices: each is the perpetrator of a distinct offence, subject to its own procedures and punishments. Moreover, corruption must be distinguished from the traffic of influence that one individual exercises over others to persuade them to refrain from carrying out one of their duties so as to give him an undue advantage. Both the corrupter and the corrupted can be civil servants, State agents, private individuals or elected officials. Corruption thus creates a dual responsibility: the corrupted (the passive subject) is just as responsible as the corrupter (the active subject). This dual responsibility gives rise to the fact that both parties are liable to punishment. Corruption can also engage the responsibility of the State if the latter is organizing it through the operation of its organs or when, by a permissive attitude, it accepts the fact that private entities or private individuals are practising it.

The internal corruption described above can have several connections in other countries: it then becomes transboundary and is carried out by private companies or individuals on a large scale and involving several States. Corruption, whatever its perpetrator and its extent, constitutes economically speaking a serious obstacle to the economic and social development of the countries affected. Thus, poisoning as it does the economy and the social fabric, corruption violates the economic, social and cultural rights as well as the right to development and to a healthy environment of the peoples and population sectors concerned.

The Interregional Seminar on Corruption in Government, held under the auspices of the United Nations at The Hague in December 1989, in association with the Department of Technical Cooperation for Development, identified impunity as an underlying element of the various forms of corruption. The Eighth United Nations Congress on the Prevention of Crime and the Treatment of Offenders, held at Havana from in 1990, noted in its resolution 7 on corruption in Government that that form of corruption was universal and that it had deleterious effects on the economies of all countries, but particularly those of the developing countries. Nowadays, this corruption is developing on a world scale. At the international level, it is harmful to the economies of the countries individually affected and, moreover, amplifies the imbalances caused by the world economic order as a whole.

In its resolution 1992/50 on the fraudulent or unlawful enrichment of top State officials, the Commission on Human Rights pointed clearly to the responsibility of the North in connection with the commission of that crime in the countries of the South and thus raised the question, still unclear in international law, of the restitution to despoiled peoples, for reinvestment in local economic, social and cultural development, of the funds which their leaders have extorted from them, usually with the complicity of foreign banks. The existence of highly developed capital markets encourages certain offences such as insider offences. The same is true in the countries with economies in transition. The headlong privatization taking place is accompanied by similar phenomena.

Jose Arthur Rios wrote: "Corruption is the product of inverted ethics, in that the act of corrupting involves the idea of reciprocity, which is actually an element of equity and justice". In a modern society, this rule of reciprocity results in corruption when it involves transactions which subordinate the management of public resources to the interests of the private sector. In primitive societies, the custom of reciprocal gift-giving establishes a network of obligations between the groups. This network is functional and legitimate in such societies and in theory raises no question of corruption. Gift-giving can become an instrument enabling some individuals to impose their will on those who are unable to reciprocate. This latter group may be working for the private sphere at the expense of the public sphere or the general interest. In the context of this report, we must avoid lumping together minor forms of corruption (e.g. of public officials) and major forms which are sources of massive violations of human rights.

The advent of modern society has endowed money with three separate functions which often make it the catalyst for the phenomenon of corruption, since money has no bounds, can be transferred unobtrusively from one person to another and can be used for any transactions by virtue of its abstract nature. As noted earlier, corruption is universal. Nowadays, all States, whether developed or developing, suffer from the same phenomenon to varying degrees. Corruption is thus a functional phenomenon operating at all levels and in all spheres of activity. It has been rightly pointed out that corruption cannot thrive in a pluralistic and democratic society.

Data on corruption is naturally difficult to obtain since concealment is in the interest of all parties. Public sector corruption could not be effectively discussed prior to the mid-1980s, notably with regard to the developing countries, because of its political implications. The level of official corruption in some countries, notably in Africa, has driven foreign investors out of the market, and made it virtually impossible to conduct business. In 1992 surveys in Latin America indicated that people at all levels of society believed that their governments were corrupt and exhibited a greater indignation against corruption than for the past decades. Failure to respond to evidence of corruption had become a principal source of instability in some of the region's democracies; politicians were recognizing that attacking corruption was a means of gaining votes. The USA complained in 1993 that, with the exception of Singapore, official graft was commonplace in much of East Asia, especially China, Indonesia, Philippines and Thailand, and had become more exorbitant. As an indication, in 1993 it was estimated that a supply contract could involve extra-contractual commissions of up to 15% compared to 5% a decade before (examples include: 5% of US$200,000 for a senior official; of US$2 million for a top official; of US$20 million for a minister and key staff; of US$200 for a head of state). A 1993 survey indicated that although the problem existed in Malaysia, South Korea and Taiwan, it was not as common or as systematic.

[Bangladesh]

In the 1990s it was alleged that bureaucratic inefficiency and corruption had resulted in the failure by the government to construct a single cyclone shelter over a period of 10 years in a country periodically devastated by cyclones.

[Brazil]

Throughout the 1980s there was widespread media coverage of official corruption in the form of kickbacks, padded payrolls, milked bank accounts and other irregularities that had been characteristic of previous administrations. During the years of military rule, senior officials benefited from rent-free homes, executive jets and other government-financed privileges. Government ministers are frequently denounced by the media for corruption since there is little effort to investigate proffered evidence. One minister was nicknamed "Mr 10 Percent" in reference to the commission he purportedly received on major government contracts. The president elected in 1989 achieved popular support by attacking the number of public officials who collected large salaries without working.

[China]

Chinese officials in Hainan are alleged to have embezzled the equivalent of US$ 1.5 billion in the 14 month period up to March 1985. In 1991 a number of elderly soldiers publicly committed suicide in protest that their benefits were being embezzled by corrupt officials. In 1993 corruption was widely considered to be worse than at any time in recent decades. To match the successes of entrepreneurs in the emerging market economy, government and party officials have turned to the operation of businesses that take advantage of their administrative powers. Service charges may be levied for services that would normally be free, but there were also increasing instances of serious crimes, even by officials from judicial and administrative law enforcement agencies. In the first half of 1993 nearly 30,000 party and government officials were disciplined on charges of irregularities and malpractice.

[Colombia]

Drug traffickers have traditionally protected their operations by corrupting law enforcement agents, judges and other government officials, or using intimidation. The situation in Colombia is considered to be the most dramatic manifestation of this in the world. In drug cases judges there are offered a choice between a bullet or a bribe. Some 200 judges and judicial personnel have been assassinated there in the last few decades.

[Eastern Europe]

In the annual report of the European Bank for Reconstruction and Development in 1993 noted that the rise of corruption in the public sector together with the growth of crime in the private sector were paralyzing economic reform in central and eastern Europe.

[Western Europe]

In 1992 numerous frauds in the European Commission funds management resulted in the loss of 260 million ecus. 1030 cases were in agriculture, and 820 in various nations' funds. The worst cases involved olive oil, cattle and video cassettes.

[Hong Kong]

In 1993 a former senior government prosecutor in Hong Kong, appointed to head the New Zealand anti-corruption unit, was found guilty of receiving bribes.

[India]

In 1994 it was reported that customers requiring a telephone line could either wait four to eight years for its installation or pay a bribe of nearly US$1,000. Unscrupulous telephone workers may then rent use of that line to other users so that the formal owner is billed, notably for international calls.

[Indonesia]

Bureaucratic corruption and nepotism are reported to be endemic creating unhealthy rivalries between political and business elites. This was considered to be due to lack of counter-balancing forces that left the state bureaucracy uncontrolled. For 1985 it was revealed that the customs office had received some US$ 200 million a year in bribes, leading to inefficiency which left thousands of tons of goods waiting 11 years for customs clearance.

[Italy]

The major investigation in the 1990s into corruption centred principally on illegal commissions and kickbacks paid by private contractors to ensure being awarded a contract from a public agency. This system was so pervasive that once called into question it became extremely difficult for political and business life to function normally at any level. Evidence indicated that major corporations had colluded with officials and politicians. The creation of a major state-owned chemical corporation was believed to have generated some US$280 million in kickbacks and bribes. Most of the senior managers of the state energy conglomerate, including its president, were arrested on charges of embezzlement and kickbacks. Managers of the transport, airline and railway authorities were also arrested. Evidence in 1993 indicated that officials in the public health service had accepted very large bribes from pharmaceutical companies, notably to speed up government approval for price increases for medicines and possibly to approve the sale of dangerous ones. The head of the pharmaceuticals commission of the health ministry, a former member of the P2 Masonic Lodge, had personally accumulated an estimated US$100 million in the form of cash, gold, diamonds and foreign bank accounts.

[Japan]

Major corruption scandals emerged in 1992 and 1993 implicating officials at the highest level in bribery related to public contracts. In 1992 prosecutors indicated that the former president of a major corporation had handed out more than US$17 million in illegal gifts to government officials, possibly including three former prime ministers and several current cabinet ministers.

[Kenya]

Senior government officials were alleged in 1992 to have approved payment of pre-export finance worth £360 million, on goods (diamonds and gold) which may never have existed, so as to maximize the value of government credit guarantees. The auditor-general's report confirmed the illegal compensation paid in lieu of sale of goods. In 1993 donors refused to continue international aid to the country in an effort to end a level of government corruption which undermined all their efforts.

[Mexico]

Although by 1992 some officials had been dismissed for the abuse of power for self-enrichment, it was believed that others profiting from arrangements with companies they were supposed to regulate were being spared. The ruling political party was accused of being financed through government sources.

[Romania]

Much of the aid in the early 1990s, intended for orphans and institutionalized inmates of psychiatric homes, was allegedly diverted into the hands of corrupt officials and intermediaries who sold it at a profit on the blackmarket, notably in neighbouring countries. The web of corrupt officials was organized across the country and allowed only token amounts to reach the intended institution.

[Russia]

Following the breakup of the USSR, the was widespread opportunity at every level for diversion of goods. There was hoarding by officials in the retail network waiting for prices to increase. Black marketeers colluded with official distributors to sell scarce goods "under the counter" or in parallel markets. In some cases an alliance of government officials and black marketeers promoted direct sabotage where they had a vested interest in scarcity. By 1993 rampant corruption was masquerading as free market capitalism.

[South Africa]

The homelands created and funded by the apartheid regime provided a lucrative source of wealth for a small elite of black politicians who used the new bureaucracies as a source of patronage and power.

[Spain]

In 1993 a minister was called upon to explain the role of intermediaries in the awarding of state contracts worth £440 million pounds and the reports of illegal commissions.

[Syria]

In 1993, although most transactions were made legally, the low salaries of civil servants encouraged them to seek ways to share in the new prosperity of the country through acceptance of bribes to speed certain transactions, notably in relation to oil sales and customs duties.

[UK]

In 1993 few disputed the rise in bribery corruption and theft at all levels of the public sector, although many of the most publicized allegations were not illegal but rather a breach of self-imposed etiquette. In 1979 senior staff at the Pubic Services Agency were convicted for accepted bribes for building contracts. In 1993 senior civil servants, contract staff and 12 outside companies were named in parliament for their alleged involvement in at least 15 separate cases of fraud, nepotism and tax evasion involving over £20 million in contracts each year over a period of 10 years. Bogus companies were allegedly used by contracting companies to avoid tax, insurance and VAT. False claims and invoices were discovered. Civil servants were reported to have received bribes to approve contracted work. Members of parliament accused the catering service run by the Treasury of fraud, malpractice, mismanagement, poor control and irregularities; profits were allegedly manipulated and fictitious employees were declared to evade tax. A senior member of the Conservative Party was severely censured in 1994 for claiming publicly that it was the practice in other countries, notably continental Europe, to use bribery and nepotism to gain contracts and educational qualifications. In 1994 it was claimed that the contracting out of public services by government to private companies was likely to lead to a marked increase in fraud and corruption of public officials.

In 1994 for the first time a parliamentary committee consolidated 17 separate reports on public expenditure and noted 26 different scandals involving millions of pounds. These ranged from unnecessary first class travel and free house deals to massive waste under such headings as "doubtful and incorrect payments to training providers". The report stated that traditional standards of integrity, impartiality and objectivity were at risk and that incorruptibility was under threat. The chairman indicated that the situation was getting worse and that, if it did continue, beyond the country could be faced with something that could seriously affect public administration. The report noted: inadequate internal accounting systems, leading to waste and risk of fraud and theft; ex-gratia payments made without authority on termination of employment, sometimes in circumstances where disciplinary action might have been more appropriate; failure to secure full recovery of benefit provided to senior executives to which they were not entitled; concealment of information.

[USA]

The confusion resulting from 'official' tolerance of criminal business behaviour and unlicensed gambling in the USA is well documented. The Clinton administration has undertaken to stop bribery by foreign companies that was placing corporations from the USA at a disadvantage in competing in certain countries. The USA is one of the few countries that has endeavoured to eliminate the tradition of bribing local officials to obtain business contracts, a procedure outlawed by the Foreign Corrupt Practices Act of 1978. Much was made in the media in 1991 of the frequent use of military aircraft by a White House official for personal or partisan travel, notably to ski resorts. A major FBI probe was undertaken into four big contractors allegedly involved with NASA employees in bribery to obtain space programme contracts. In 1992 there was considerable concern at Iraq's corruption of the Department of Agriculture in 1989, perverting the grain credits programme, contrary to the will of Congress. In 1993 a former governmental official was convicted of conspiring to defraud the government by accepting illegal gratuities following use of a series of consultants in housing development projects.

[Uganda]

In 1986, following years of internal strife, corruption was endemic in the civil service with staff living off bribes in the form of "commissions".

[Venezuela]

In 1988 there were a series of allegations in the press concerning officials taking a percentage from government contracts during a period fiscal austerity.