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Corrupt to the core

Despite reforms, bribery remains a way of life in the Czech Republic
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May 21st, 2008 issue

By Libuše Bautzová

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“Please don’t mention my name in the article,” a government official told me recently when being interviewed on a completely non controversial subject.
When asked why, he replied, “I used to be a businessman, and you know how it is when you’re in business. Your conscience is never completely clean.”
It seemed that he was confirming what most Czechs believe: A businessman is equivalent to a crook.
The term “business” has negative connotations in the Czech Republic. Perhaps this is due to the fact that, under the former regime, there was a category of crime called “unauthorized entrepreneurship.” Or perhaps it is due to a long line of scandals in the media involving persons who founded businesses with one goal in mind: to fleece their clients or the state at all costs.
Media outlets have a great deal of influence on the way the public views entrepreneurship. The story of a convicted swindler-businessman is music to the ear of many a courageous citizen who is convinced that nobody deserves to earn more than he does. At the same time, when a story about a man shot down by an unknown gunman while leaving a luxury hotel on Wenceslas Square hits the TV news, viewers remain tuned in until the reporter notes that it may have been a matter of settling business accounts. “That explains it — businessmen,” the viewer notes, accepting the event as a matter of natural course.
Bribery as a national trait
In September 2005, Transparency International noted that the Czech Republic had one of the highest rates of corruption in the European Union. A World Bank study placed the Czech Republic at the top of the list in Central and Eastern Europe in terms of the rise in corruption involved in the granting of public tenders.
Though Czechs consider corruption to be a great problem, paradoxically the surveys show that they are quite tolerant of bribery. A study conducted by GfK, an international market research firm in the fall of 2006, showed that 56 percent of Czechs consider bribes to be a normal part of life.
Half the citizens in the country have given bribes, be it a box of candy for the doctor, a 500 Kč note to a traffic policeman, several thousand crowns to an official at the municipal construction office, or a contribution to the bank account of an official who has the final say on a military tender.  
We have become used to the fact that even those transactions that are strictly governed by law have to be helped along.
A PricewaterhouseCoopers study of economic crime showed that, in the past two years, more than 30 percent of the companies surveyed found themselves in situations where they felt they were being asked for a bribe. Almost half felt that they had missed a business opportunity because their competitor paid a bribe.
Every post-1989 government has sworn to fight corruption. For example, after winning the 1998 elections, Prime Minister Miloš Zeman, in his “Clean Hands Campaign,” promised to meticulously investigate all suspicions of corruption, to reopen closed investigations and to toughen sanctions.
But it all fizzled out.
In 2000, the European Commission, in its Evaluation Report for the Czech Republic, called the campaign a failure and said that the war on corruption and economic crime in the country was unsatisfactory.
In the latest current strategy for the years 2006 to 2011, Prime Minister Mirek Topolánek is betting on the notion that less government interference and control equals less corruption. He wants to minimize government regulation, simplify legislation, lower the amount of funds portioned out by the state and reduce the bureaucracy in the administration.
Journalists are to play a key role in revealing and publicly denouncing corruption. But will that be enough?
The trouble with public tenders
Of all types of corruption, public tenders offer the biggest opportunity. One only needs to recall the long line of dubious tenders that have plagued the Defense Ministry over the past 14 years.
They have ranged from scandals over electric and electronic equipment for the L-159 light combat airplanes through the acquisition of faulty parachutes to the recent Army general staff’s financing of parties and luxury items from a 17 million Kč slush fund.
Last year, suspicion of corruption emerged in the lease of the Gripen Swedish supersonic aircraft when a Swedish television station revealed that Saab officials had paid out bribes to Czech officials. The affair is still under investigation. (In 2001, four bidders pulled out of the Czech government’s plans to purchase 36 new supersonic jet fighters, claiming the tender was not transparent, leaving just one contender in the running, the British-Swedish consortium of Saab/BAE Systems.)
Topolánek’s government is now talking about making the tender process more transparent, as well as the need to increase oversight of public officials and their property during their time in office. There is also a promise to beef up penalties in the Criminal Code and in a conflict of interest law.
More thorough internal oversight at the ministries and other government institutions where there is a threat of corrupt practices would certainly help. These problems have to be dealt with in the same way as in the corporate realm, since the causes of corrupt practices and financial scams are the same in all sectors.
Though Czech losses due to corruption may seem high, a look at the rest of the world puts things into sad perspective.  
Even publicly traded companies are no exception. In December 2001, the energy conglomerate Enron, once the seventh-largest corporation in the United States, went bankrupt due to far-ranging accounting fraud and hidden losses. Accounting fraud forced the management of the Italian dairy and food corporation Parmalat to declare bankruptcy.  
One can look at companies like Volkswagen, Siemens and Société Générale — all have been implicated. The most recent scandal appeared in February 2008 with the investigation of tax evasion of the now-former director of Deutsche Post Klaus Zumwinkel, who used Liechtenstein as a tax haven.
One foot in the East
In the Czech Republic, cases of fraud investigations that drag on for too long and often evaporate into thin air are all too common. Politicians and government officials at all levels are often involved. This is what the public sees and hence, what it imitates: “If those at the top can do it, so can we.”
The official I mentioned will probably continue to work in the administration according to the same rules he followed in his former company. He’s simply used to it. Both government and corporate employees have a greater tendency to commit crimes in places where clear ethical boundaries are not set, and there is low loyalty to the employer or institution. A corruption hot line can reveal or mar some of the impending or ongoing misdeeds, but it doesn’t improve the atmosphere. A business environment where adherence to clear rules is a matter of course is the only way to fight economic crime.
Though the Czech Republic can rank itself among the mature countries of Europe, in some ways we still belong in the East, where the law may be understood but is not broadly respected.
Eighteen years after the transformation, this is not good news.
— The author is a journalist and head of the economic section of television station Z1. A longer version of this article originally appeared in The New Presence.


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Reader's comments:

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[11:18 23/05/2008] : Say all you want. The fact is, corruption is a part of business. The truth is, it doesn't matter what part of the world you're in. Any time there's big money involved, the sharks will prowl.
The only thing that sets apart Czechs from Americans, for example, is that Americans make it official.
I think "loopholes" is the term.
Sanan Phutrakul
Prague
[14:54 25/05/2008] : Here's another know-it-all who demonstrates his anti-American prejudice and lack of actual knowledge about America.

Try bribing a cop or any other civil servant in the United States. You'll be in handcuffs faster that you can say "boo".

But politicians on the campaign trail are a different story. Bribing them BEFORE they become civil servants is perfectly acceptable.

Don't ask me why. I just live here.
Phillip David Haskett
Houston
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