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Russia to launch own corruption index, to replace ‘biased’ Transparency Intl

Kaliningrad anti-corruption rally (photo: RIA Novosti/Igor Zarembo)

A Russian government institute has developed a complex program for evaluating the level of corruption, which its authors say is superior to the widely advertised, but very subjective Transparency International index.

The new method will be presented by the Institute of Law and Comparative Jurisprudence at the Eurasian Anti-Corruption Forum this week, the Izvestia daily reported on Monday. It is called the International Corruption Monitoring Program, or MONKOR.

The new index is based on criminal statistics, economic data, opinion polls and analysis of national legislation, one of its authors, Artyom Tsyrin, told reporters.This makes it different from the famous Corruption Perception Index, which is prepared annually by the international NGO Transparency International, he added.

“The Corruption Perception Index by Transparency International only evaluates psychological attitude of responders in polls. As a result, they are making conclusions on desirable institutional changes in the country purely on the basis of sociological studies. We try to find a correlation between actions and effects. It is important to move away from a subjective approach and towards objective research.

Our institute offers a universal tool allowing any willing nation to conduct an evaluation of its anti-corruption efforts and figure out whether the national anti-corruption policy is effective. MONKOR can compare the results in various countries that use its methods,” Tsyrin said.

Despite the fact that MONKOR’s author sees it as an alternative to Transparency International’s index, the latter is used in the Russian method as part of its fundamental data, along with the Word Bank’s country policy and institutional assessment (CPIA) for Corruption. Experts at the International anti-corruption academy and the FATF (Financial Action Task Force) group also participated in the research.

In Russia, the index uses data provided by the Supreme Court, the Interior Ministry and the Prosecutor General’s Office. It will also include “corruption market” data provided by the Ministry of Economic Development.

The new index is being tested in Russia and Kyrgyzstan, and talks are being held with Belarus, Kazakhstan and some other nations, Tsyrin told reporters.

Russia’s position in the Transparency International Corruption Perception Index has been gradually falling since the mid-1990s. In 2014, the country was placed 136th of 174, a list also including Iran, Lebanon, Nigeria, Kyrgyzstan and Cameroon. The authors of the research emphasized that Russia’s anti-corruption effort was, in their view “chaotic and irresolute.”

Top Russian officials have repeatedly criticized the TI’s approach as biased and politicized. The head of the Presidential Administration, Sergey Ivanov, said that he was “extremely skeptical” about the 2014 index, adding “ratings can be drawn by anyone.” At the same time, Ivanov noted the authorities were closely following serious sociological agencies, including foreign and international organizations.

One such agency is Ernst&Young, which lowered corruption risks in Russia in 2014 and put it below average world levels.

RT                                   April 20, 2015

EurActiv:Ukraine crisis, anti-corruption drive, boost Romanian energy reform

Ukraine in crisis (image:

Recent investigations of “smart guys” contracts have helped reduce corruption within the Romanian energy sector, and have accelerated the country’s market liberalisation, at a time when the Ukraine crisis has forced Bucharest to assume a more important role in region, EurActiv Romania reports.

The Romanian energy sector has undergone important changes in recent years. Through consistent judicial and legislative efforts, both the fight against corruption and the legal framework regulating the sector have greatly improved.

A 2014 report of independent think tank Expert Forum notes that with the adoption of new legislation in 2012, the Regulatory Authority for Energy has become more independent of political pressure, and that some of its activities have become more transparent. The report contends that there still remains a need to increase the transparency and quality of the Authority's actions, though, as well to tackle remaining corruption issues.

Market liberalization

As an EU member, Romania had to start the process of liberalising its energy sector. Almost immediately, Romanians were confronted with predictions of higher prices. The government subsequently postponed the process.

Asked by EurActiv Romania to comment on what an open gas market will mean for Romanians, Expert Forum analyst Otilia Nu?u said that gas consumers should be able to switch suppliers.

Romanians do not understand is that they are not required to purchase energy exclusively from the company that manages the distribution grids (EON or GDF), Nu?u explained.

She added that customers would be able to purchase from any of the 120 suppliers in the market, and that the distribution companies managed by EON and GDF will be required to ensure access to gas from suppliers, at regulated distribution tariffs.
What is needed is a well-designed social safety net, where the government can provide targeted income support for consumers who are too poor to afford price increases.
Romanians must also change their understanding of consumer protection. It does not mean "cheap gas", but affordable energy, of good quality, without unexpected interruptions, with information about what is supplied.

Vulnerable consumers

A key element Romania's energy strategy concerns the protection of vulnerable consumers from fluctuating prices. As the European debate on the Energy Union picks up momentum, many suggest that Romania should use its own natural resources, an advantage which gives its significant breathing room to assume a more forceful role in promoting the issue.

During a recent debate on the Energy Union organized by the European Parliament's Information Office in Romania, Victor Bo?tinaru, MEP and vice-chair of the S&D group, noted that despite being rich in energy resources, Romania has had a small presence in the overall European debate. He argued that finding a solution for vulnerable consumers needs to become a priority.

The same problem was highlighted by the former Romanian Energy minister, Razvan Nicolescu. During the same event, he noted that Romania should have significant input, as it is a supplier. Nicolescu argued that this leverage should be used to support an EU-wide definition of the vulnerable consumer.

Infrastructure Concerns

Beyond the legislative framework and price rates, an essential problem for Romania's energy sector lies with the state of its transport infrastructure. Although recent improvements have been accomplished, there are many elements that have not yet been addressed.

The ongoing debate over the Energy Union pushes the topic of energy infrastructure further into the spotlight, particularly as the level of funding is not insufficient only in Romania, but at EU level as well.

In this sense, the Vice-President of the European Parliament, Adina V?lean (EPP), has drawn attention to the fact that the EU cannot cover the costs of infrastructure development. Participating in the debate on the Energy Union, she encouraged the usage of EU funds in conjunction with other financial mechanisms that can help attract private resources.

Similarly, Otilia Ni?u explained that although some improvements can already be seen, there is great need for better usage of EU funds in Romania.
Romania should be able to export gas, which requires investment for reverse flows on Arad-Szeged (Romania-Hungary), compressors to be able to export to Moldova on Iasi-Ungheni (Romania-Moldova), reverse flows with Ukraine, and an interconnector with Bulgaria on both directions.

Electiricity transmission operator Transelectrica must also invest to better integrate future renewables and export to Moldova. The main challenges are to have good tariff regulations and to make best use of available funding, including from EU, Ni?u said.

Energy security in the region

The situation in Ukraine has raised many concerns and has turned the eyes of Ukrainian officials towards Romania. The country`s important energy resources makes it an important partner for escaping Russia's energy supply monopoly.

In a recent interview with, Teofil Bauer the Ukrainian ambassador in Romania, said that Romania's energy sector reforms are very important for his country. “Romania will become an exporter of energy resources, and we, as a neighboring country, are very interested in working with Romania in this field,” Bauer said.
Indeed, Romania has important resources, which could be exploited for the export market. However, some suggest that the country is still far from assuming a key role in the area.

”What concerns us is not the reliance on Romanian gas, but to ensure that we do not rely too much on a single supplier which can abuse market dominance. Romanian gas (Petrom, Romgaz, and the new reserves) must compete with Gazprom. In a few years, the gas that we import from Hungary will no longer be from Gazprom only,” Ni?u said.
Asked to explain what is expected from Romania in the context of the Energy Union, she said that this new initiative of the Union is not much more than a renewed urgency in implementing the Third Energy Package and building a single European energy market.

“Romania has only to gain from the Energy Union. […] Forcing the energy companies to compete means, for example, that "smart guys" contracts (long term contracts for energy from state owned companies to preferred buyers, non-competitively, at below market price) could no longer be renewed. Market liberalisation means that preferred consumers could no longer get energy at regulated prices, or use regulated prices as fake price references to purchase cheap energy from state-owned companies,” Ni?u added.

According to Nitu, the Ukraine crisis has triggered a new sense of urgency to solve longstanding problems. The solution is the faster implementation of the single European energy market, so that countries are better interconnected, and can purchase gas from more sources and routes, she said.

ActMedia                       April 16, 2015

German government poised to tackle healthcare corruption

Healthcare Corruption (photo: Techniker Krankenkasse/Flickr)Under a bill drafted by Justice Minister Heiko Maas, doctors charged with corruption could face up to five years in prison or a fine, closing a legal loophole that has for years hindered the fight against corruption in the medical sector. EurActiv Germany reports

Crookedness in the health system inhibits competition, increases the price of medical services, and undermines patients’ trust in physicians and medical professionals.

But Germany's current legal situation offers far too few possibilities to apply penalties.

Last year, the European Commission gave the Federal Republic a good score on its evaluation of anti-corruption efforts in the country. Still, the first report on combating corruption criticised the lack of criminal provisions for practicing doctors.

Christian Lange, parliamentary state secretary to the Federal Minister of Justice and Consumer Protection, claimed last year that doctors do not fall under the existing regulation on taking bribes if they accept contributions from pharmaceutical firms for prescribing certain medications.

Lange based the conclusion on a 2012 decision by the Federal Court, which, he said, also prevented those giving the bribe from being covered by the law.

To put an end to this, Justice Minister Heiko Maas has now proposed a bill that would make bribery in the healthcare sector a criminal offense.

Physical therapists, pharmacists and laboratories also affected

If the bill becomes law, violators charged with giving or accepting bribes would be subject to imprisonment for up to three years, or a fine. In especially serious cases, a penalty ranging from three months to five years could be applied.

The planned legislation would cover all healthcare occupations, including physical therapists and pharmacists. Clinics, laboratories and healthcare supply stores would not be permitted to offer incentives to medical professionals who refer patients to them.

The anti-corruption NGO Transparency International Germany welcomed the bill.

“The loophole, which has existed for years, is an unacceptable hindrance to the fight against corruption in the healthcare sector,” said Reiner Hüper, director of the working group for criminal law.

Still, Transparency wants the corruption as a criminal offence to be declared an offence liable to public prosecution. In this way, law enforcement authorities would be required to take their own initiative and pursue a suspected offence.

According to the new bill, criminal prosecution would require a complaint, whereby official action would only be taken in cases of special public interest.

Classical healthcare occupations handle €100 billion in public funds

Wolfgang Wodarg, a doctor and a member of Transparency Germany’s board of directors, said a exhaustive law is needed. Corruption at the cost of insurance holders can disrupt social stability, he argued.

“All cases must be uncovered and subsequently penalised by specially trained criminal investigators in cooperation with professional organisations,” Wodarg indicated.

Transparency also wants breaches of duty against communities of solidarity (Solidargemeinschaften) to be just as liable for prosecution as those against patients.

When it comes down to it, he pointed out, individuals in classical healthcare professions are entrusted with the use of over €100 billion in public contributions and tax money.

By Nicole Sagener (translated from German: Erika Körner)

EurActiv                                     April 15, 2015

Russia's Embezzlement Problem Is Out of Control

Embezzlement in Russia (image: Russian who regularly watches television knows full well that this country is surrounded by enemies. That gives special relevance to former Soviet leader Josef Stalin's bygone call to industrialize and step up military production, and his argument that "Either we do this, or they will crush us."

Heeding this sage utterance, the Kremlin decided in 2010 to spend more than 20 trillion rubles (then $650 billion) rearming Russia's military. And now, President Vladimir Putin announced this week that "the pace of implementing state defense orders as of the end of 2014 has exceeded planned targets."

The progress is apparently so great that, for some reason, Putin finds it necessary, every six months, to meet personally for several days at a time with defense industry chiefs responsible for fulfilling state contracts. Putin has also approved the creation of an interagency system for controlling the use of state funds during the allocation and implementation of state defense orders.

The authorities plan to create an extremely complex system coordinating the databases of the Russian Defense Ministry, Federal Anti-Monopoly Service, Federal Financial Monitoring Service and the Bank of Russia. That supervisory Medusa will stand poised to strike the moment any ultra-patriotic defense industry manager transfers state funds allocated for weapons production into an unauthorized bank account.

zzlement Those workers first went on strike, and then declared a hunger strike in order to receive their back pay.

Of course, that news did nothing to strengthen the authority of Deputy Prime Minister Dmitry Rogozin, whom Putin had made responsible for that project and for overseeing defense contracts in general. Rogozin hastily traveled to the Far East and ensured the proper payment of wages, dismissed some officials and arrested others, and, of course, put the construction process back on track.

And as to the reason for the widespread theft and corruption — with one manager issuing a monthly salary to his wife of 800,000 rubles ($15,000) — Rogozin said the problem stemmed from "the managers whom the former Defense Minister appointed, and who, instead of carrying out very important strategic orders from the president and government, often engaged in embezzlement."

Perhaps former Defense Minister Anatoly Serdyukov, who was dismissed from his post long ago, was also to blame for the fact that even after Rogozin had restored justice at Vostochny, the men who had organized the strike and hunger strike were fired from their jobs.

In fact, the story of the Vostochny cosmodrome is just one of many examples of how budgetary funds get plundered under the cover of defense contracts. The new cosmodrome — on which work began in 2011 — is intended to replace Russia's reliance on the Baikonur cosmodrome in Kazakhstan that Moscow pays $110 million annually to use.

The authorities set a firm deadline: The new cosmodrome must execute its first launch by the end of this year. As usual though, construction on the numerous facilities in the new complex is lagging far behind schedule.

But the authorities have known that for some time already. Reports of blatant theft had plagued the construction process from the very beginning. The Audit Chamber calculated that project officials had stolen approximately 16 billion rubles ($300 million) of the 400 billion rubles ($7.5 billion) budgeted for construction.

Several months ago, the authorities arrested the chief of construction at Vostochny after he had successfully transferred approximately 500 million rubles ($9.4 million) into a third-party account.

Back in September of last year, Putin expressed surprise that construction chiefs continued to brazenly steal despite knowing that the Kremlin was paying particular attention to the cosmodrome project. It was then that he sent Rogozin to Vostochny with strict instructions to restore order.

The Kremlin also announced that the National Defense Management Center in Moscow would monitor work on the Vostochny cosmodrome in real time.

Interestingly, Rogozin was unable to stop the runaway levels of audacious theft. Video surveillance of the construction site did nothing to reveal the source of the violations and even the clear and present threat of punishment did not stop the misappropriation of budgetary funds.

Almost one year ago, Rogozin threatened to give hell to anyone found guilty of corruption at Vostochny, and yet the stealing went on unabated.

Because every large-scale government project draws embezzlers like flies, the federal authorities first imprisoned corrupt officials responsible for construction on the APEC summit in Vladivostok, and then went hunting for those who illicitly pocketed billions of rubles during the construction of ski jumps for the Sochi Olympics.

Now the authorities are pressing charges against those responsible for building the cosmodrome — that is, senior officials at Spetsstroy, a military-related federal agency subordinate to the Defense Ministry that carries out its duties in complete secrecy. The staff of that agency answers only to its immediate superiors, whom they can either bribe or mislead.

Nobody — not parliament, the media or civic organizations — has any means of controlling the agency. It is therefore obvious that they will embezzle at an unimaginable scale. And all against the backdrop of Rogozin's lamentations and video surveillance from Moscow.

By Alexander Golts

The Moscow Times                          April 13, 201

U.S. company settles bribery-related charge

USA company settles bribery charges (photo:

April 13: The US Securities and Exchange Commission announced that an Oregon-based company agreed to pay more than $9.5 million to settle allegations that it violated the Foreign Corrupt Practices Act.

According to the Securities and Exchange Commission release, the company—a developer of infrared technology for use in binoculars and other sensing products and systems, for both government and personal use—paid for the personal travel of government officials in countries in the Middle East (these individuals played key roles in decisions to purchase the company’s products).

There was a finding that the company had few internal controls over gifts and travel out of its foreign sales offices.
KPMG observation

Companies that sell products to foreign governments or that regularly interact with foreign government officials need to be mindful of U.S. legal requirements with respect to such interactions.

KPMG                                     April 13, 2015

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