According to David McClintick ("Swordfish: A True Story of Ambition,
Savagery, and Betrayal"), in the late 1980's, the FBI and DEA set up
dummy corporations to deal in drugs. They funneled into these corporate
fronts money from drug-related asset seizures.
The idea was to
infiltrate global crime networks but a lot of the money in "Operation
Swordfish" may have ended up in the wrong pockets. Government agents and
sheriffs got mysteriously and filthily rich and the whole sorry affair
was wound down. The GAO reported more than $3.6 billion missing. This
bit of history gave rise to at least one blockbuster with Oscar-winner
Halle Berry.
Alas, slush funds are much less glamorous in
reality. They usually involve grubby politicians, pawky bankers, and
philistine businessmen - rather than glamorous hackers and James Bondean
secret agents.
The Kazakh prime minister, Imanghaliy
Tasmaghambetov, freely admitted on April 4, 2002 to his country's
rubber-stamp parliament the existence of a $1 billion slush fund. The
money was apparently skimmed off the proceeds of the opaque sale of the
Tengiz oilfield. Remitting it to Kazakhstan - he expostulated with a
poker face - would have fostered inflation. So, the country's president,
Nazarbaev, kept the funds abroad "for use in the event of either an
economic crisis or a threat to Kazakhstan's security".
The money
was used to pay off pension arrears in 1997 and to offset the pernicious
effects of the 1998 devaluation of the Russian ruble. What was left was
duly transferred to the $1.5 billion National Fund, the PM insisted.
Alas, the original money in the Fund came entirely from another sale of
oil assets to Chevron, thus casting in doubt the official version.
The
National Fund was, indeed, augmented by a transfer or two from the
slush fund - but at least one of these transfers occurred only 11 days
after the damning revelations. Moreover, despite incontrovertible
evidence to the contrary, the unfazed premier denied that his president
possesses multi-million dollar bank accounts abroad.
He later
rescinded this last bit of disinformation. The president, he said, has
no bank accounts abroad but will promptly return all the money in these
non-existent accounts to Kazakhstan. These vehemently denied accounts,
he speculated, were set up by the president's adversaries "for the
purpose of compromising his name".
On April 15, 2002 even the
docile opposition had enough of this fuzzy logic. They established a
People Oil's Fund to monitor, henceforth, the regime's financial
shenanigans. By their calculations less than 7 percent of the income
from the sale of hydrocarbon fuels (c. $4-5 billion annually) make it to
the national budget.
Slush funds infect every corner of the
globe, not only the more obscure and venal ones. Every secret service -
from the Mossad to the CIA - operates outside the stated state budget.
Slush funds are used to launder money, shower cronies with patronage,
and bribe decision makers. In some countries, setting them up is a
criminal offense, as per the 1990 Convention on Laundering, Search,
Seizure, and Confiscation of the Proceeds from Crime. Other
jurisdictions are more forgiving.
The Catholic Bishops Conference
of Papua New Guinea and the Solomon Islands issued a press release
November 2001 in which it welcomed the government's plans to abolish
slush funds. They described the poisonous effect of this practice:
"With
a few notable exceptions, the practice of directing funds through
politicians to district projects has been disastrous. It has created an
atmosphere in which corruption is thought to have flourished. It has
reduced the responsibility of public servants, without reducing their
numbers or costs. It has been used to confuse people into believing
public funds are the 'property' of individual members rather than the
property of the people, honestly and fairly administered by the servants
of the people.
The concept of 'slush-funds' has resulted in
well-documented inefficiencies and failures. There were even accusations
made that funds were withheld from certain members as a way of forcing
them into submission. It seems that the era of the 'slush funds' has
been a shameful period."
But even is the most orderly and lawful
administration, funds are liable to be mislaid. "The Economist" reported
recently about a $10 billion class-action suit filed by
native-Americans against the US government. The funds, supposed to be
managed in trust since 1880 on behalf of half a million beneficiaries,
were "either lost or stolen" according to officials.
Rob Gordon,
the Director of the National Wilderness Institute accused "The US
Interior Department (of) looting the special funds that were established
to pay for wildlife conservation and squandering the money instead on
questionable administrative expenses, slush funds and employee moving
expenses".
Charles Griffin, the Deputy Director of the Heritage Foundation's Government Integrity Project, charges:
"The
federal budget provides numerous slush funds that can be used to
subsidize the lobbying and political activities of special-interest
groups."
On his list of "Top Ten Federal Programs That Actively
Subsidize Politics and Lobbying" are: AmeriCorps, Senior Community
Service Employment Program, Legal Services Corporation, Title X Family
Planning, National Endowment for the Humanities, Market Promotion
Program, Senior Environmental Employment Program, Superfund Worker
Training, HHS Discretionary Aging Projects, Telecomm. & Info.
Infrastructure Assistance. These federal funds alone total $1.8 billion.
"Next"
and "China Times" - later joined by "The Washington Post" - accused the
former Taiwanese president, Lee Teng-hui, of forming a $100 million
overseas slush fund intended to finance the gathering of information,
influence-peddling, and propaganda operations. Taiwan footed the bills
trips by Congressional aides and funded academic research and think tank
conferences.
High ranking Japanese officials, among others, may
have received payments through this stealthy venue. Lee is alleged to
have drawn $100,000 from the secret account in February 1999. The money
was used to pay for the studies of a former Japanese Vice-Defense
Minister Masahiro Akiyama's at Harvard.
Ryutaro Hashimoto, the
former Japanese prime minister, was implicated as a beneficiary of the
fund. So were the prestigious lobbying firm, Cassidy and Associates and
assorted assistant secretaries in the Bush administration.
Carl
Ford, Jr., currently assistant secretary of state for intelligence and
research, worked for Cassidy during the relevant period and often
visited Taiwan. James Kelly, assistant secretary of state for East Asian
and Pacific Affairs enjoyed the Taiwanese largesse as well. Both are in
charge of crafting America's policy on Taiwan.
John Bolton,
erstwhile undersecretary of state for arms control and international
security, admitted, during his confirmation hearings, to having received
$30,000 to cover the costs of writing 3 research papers
The Taiwanese government has yet to deny the news stories.
A
Japanese foreign ministry official used slush fund money to finance the
extra-marital activities of himself and many of his colleagues - often
in posh hotel suites. But this was no exception. According to Asahi
Shimbun, more than half of the 60 divisions of the ministry maintained
similar funds. The police and the ministry are investigating. One arrest
has been made. The ministry's accounting division has discovered these
corrupt practices twenty years before but kept mum.
Even
low-level prefectural bureaucrats and teachers in Japan build up slush
funds by faking business trips or padding invoices and receipts.
Japanese citizens' groups conservatively estimated that $20 million in
travel and entertainment expenses in the prefectures in 1994 were faked,
a practice known as "kara shutcho" (i.e., empty business trip).
Officials
of the Hokkaido Board of Education admitted to the existence of a 100
million yen secret fund. In a resulting probe, 200 out of 286 schools
were found to maintain their own slush funds. Some of the money was used
to support friendly politicians.
But slush funds are not a
sovereign prerogative. Multinationals, banks, corporation, religious
organizations, political parties, and even NGO's salt away some of their
revenues and profits in undisclosed accounts, usually in off-shore
havens.
Secret election campaign slush funds are a fixture in
American politics. A 5-year old bill requires disclosure of donors to
such funds but the House is busy loosening its provisions. "The
Economist" listed in 2002 the tsunami of scandals that engulfs Germany,
both its major political parties, many of the Lander and numerous highly
placed and mid-level bureaucrats. Secret, mainly party, funds seem to
be involved in the majority of these lurid affairs.
Italian firms
made donations to political parties through slush funds, though
corporate donations - providing they are transparent - are perfectly
legal in Italy. Both the right and, to a lesser extent, the left in
France are said to have managed enormous political slush funds.
President
Chirac is accused of having abused for his personal pleasure, one such
municipal fund in Paris, when he was its mayor. But the funds were
mostly used to provide party activists with mock jobs. Corporations paid
kickbacks to obtain public works or local building permits. Ostensibly,
they were paying for sham "consultancy services".
The epidemic
hasn't skipped even staid Ottawa. Its Chief Electoral Officer told Sun
Media in September 2001 that he is "concerned" about millions stashed
away by Liberal candidates. Sundry ministers who coveted the prime
minister's job, have raised funds covertly and probably illegally.
On
April 11, 2002 UPI reported that Spain's second-largest bank, Banco
Bilbao Vizcaya Argentaria (BBVA), held nearly $200 million hidden in
secret offshore accounts, "which were allegedly used to manipulate
politicians, pay off the 'revolutionary tax' to ETA - the Basque
terrorist organization - and open the door for business deals, according
to news reports."
The money may have gone to luminaries such as
Venezuela's Hugo Chavez, Peru's Alberto Fujomori and Vladimiro
Montesinos. The bank's board members received fat, tax-free, "pensions"
from the illegal accounts opened in 1987 - a total of more than $20
million.
Latin American drug money launderers - from Puerto Rico
to Colombia - may have worked through these funds and the bank's
clandestine entities in the Cayman Islands and Jersey. The current
Spanish Secretary of State for the Treasury has been the bank's tax
advisor between 1992-7.
The "Financial Times" reported in June
2000 that, in anticipation of new international measures to curb
corruption, "leading European arms manufacturers" resorted to the
creation of off-shore slush funds. The money is intended to bribe
foreign officials to win tenders and contracts.
Kim Woo-chung,
Daewoo's former chairman, is at the center of a massive scandal
involving dozens of his company's executive, some of whom ended up in
prison. He stands accused of diverting a whopping $20 billion to an
overseas slush fund.
A mind boggling $10 billion were alleged to
have been used to bribe Korean government officials and politicians. But
his conduct and even the scale of the fraud he perpetrated may have
been typical to Korea's post-war incestuous relationship between
politics and business.
In his paper "The Role of Slush Funds in
the Preparation of Corruption Mechanisms", reprinted by Transparency
International, Gherardo Colombo defines corporate slush funds thus:
"Slush
funds are obtained from a joint stock company's finances, carefully
managed so that the amounts involved do not appear on the balance sheet.
They do not necessarily have to consist of money, but can also take the
form of stocks and shares or other economically valuable goods (works
of art, jewels, yachts, etc.) It is enough that they can be used without
any particular difficulty or that they can be transferred to a third
party.
If a fund is in the form of money, it is not even
necessary to refer to it outside the company accounts, since it can
appear in them in disguised form (the 'accruals and deferrals' heads are
often resorted to for the purpose of hiding slush money). In light of
this, it is not always correct to regard it as a reserve fund that is
not accounted for in the books. Deception, trickery or forgery of
various kinds are often resorted to for the purpose of setting up a
slush fund."
He mentions padded invoices, sham contracts,
fictitious loans, interest accruing on holding accounts, back to back
transactions with related entities (Enron) - all used to funnel money to
the slush funds. Such funds are often set up to cover for illicit and
illegal self-enrichment, embezzlement, or tax evasion.
Less known
is the role of these furtive vehicles in financing unfair competitive
practices, such as dumping. Clients, suppliers, and partners receive
hidden rebates and subsidies that much increase the - unreported - real
cost of production.
BBVA's payments to ETA may have been a
typical payment of protection fees. Both terrorists and organized crime
put slush funds to bad use. They get paid from such funds - and maintain
their own. Ransom payments to kidnappers often flow through these
channels.
But slush funds are overwhelmingly used to bribe
corrupt politicians. The fight against corruption has been titled
against the recipients of illicit corporate largesse. But to succeed,
well-meaning international bodies, such as the OECD's FATF, must attack
with equal zeal those who bribe. Every corrupt transaction is between a
venal politician and an avaricious businessman. Pursuing the one while
ignoring the other is self-defeating.
sumber :
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