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Viewing cable 05PRAGUE1329, CZECH CORRUPTION: BAD, AND UNLIKELY TO GET BETTER

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Reference ID Created Released Classification Origin
05PRAGUE1329 2005-09-14 07:49 2011-08-25 00:00 UNCLASSIFIED Embassy Prague
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 04 PRAGUE 001329 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: KCOR PGOV EINV KJUS EZ
SUBJECT: CZECH CORRUPTION: BAD, AND UNLIKELY TO GET BETTER 
SOON 
 
REF: PRAGUE 1275 
 
1.  SUMMARY. In light of several recent Czech corruption 
scandals, post offers the following snapshot of the issue. 
Internal statistics, as well as assessments from Transparency 
International and the World Bank show the number of cases is 
increasing, while the government's effectiveness in combating 
the problem is going down.  Moreover,  for political, 
administrative, and even cultural reasons,  the problem of 
corruption could even get worse in the near future, though 
the public does not seem sufficiently enraged, particularly 
in light of favorable economic statistics, to vote against 
the parties responsible. END SUMMARY 
 
--------------------------------------------- - 
--------------------------------------------- ----- 
PETTY CORRUPTION IS BEING DEALT WITH, SYSTEMIC MALFEASANCE IS 
NOT 
--------------------------------------------- - 
--------------------------------------------- ------ 
 
2.  Oldrich Kulik of the Ministry of Interior broke the 
problem down into three types.  The first he described as the 
type of petty corruption that was necessary before the velvet 
revolution of 1989.  In the old days, the state distributed 
almost all goods and services and did so very inefficiently. 
Consumers had to pay bribes to get things the state couldn't 
provide in sufficient quantities, timeliness, etc.  Nowadays, 
the market provides most goods and services. So, Krulik 
explained, this type of corruption is to a large extent gone. 
 Exceptions are the health care sector,  where the state is 
still the main provider. 
 
3.  The second type of corruption involves discrete acts by 
low-level employees of the state, who abuse their power for 
personal gain.  Traffic police, and employees working at the 
commercial registry are two examples of this frequently 
mentioned.  Krulik explained that the government is trying to 
use technology to limit this problem.  He cited the example 
of the system which uses a camera to take a picture of a 
driver running a red light and then mails the violation to 
the driver, who can mail the fine back.  In that case, there 
is no direct contact between the public and the public 
official, eliminating the possibility of a bribe.  Making it 
possible to register a commercial firm on-line would have a 
similar effect. 
 
4.  Krulik explained that policemen make only half of what 
officers in the military earn.  Moreover, because the Fire 
Brigade has 14 districts, compared to only 8 for the police, 
there are fewer opportunities for police officials to move up 
the regional ranks. Krulik also said that policeman must 
undergo lengthier training than their better paid 
counterparts in the Army and Fire Brigade, and are even 
required to learn foreign languages.  He understood how those 
inequities could move some policemen to feel they deserve 
more money.  In addition,  the government has announced plans 
to cut police pensions, a move that could lead to as many as 
5,000 experienced police officers leaving the force before 
the law takes effect.  Inevitably, some will be tempted to 
make some extra money before they go into retirement with a 
reduced pension. 
 
5.  The third type of corruption cited by Krulik was 
malfeasance by high level officials, particularly with large 
public procurements.  Whereas Krulik was hopeful about 
managing the first two types of corruption,  he offered many 
reasons why it is unlikely that corruption in procurement, 
the judiciary, and the legislative process is going to be 
reduced in the near future. 
 
6.  There are many ways of avoiding honest tenders.    The 
competition can be arranged so that only one  firm can win. 
This was the case with the supersonic tender  in 2002-3, from 
which all but one firm dropped out.  Administrators can also 
reject all but one bid, on administrative or procedural 
grounds - missing a stamp, for example.   Finally,  Czech 
laws allow no competition bids.  The Army, for example, 
needn't issue a public call for bids if strategic military 
equipment, vital for the country's defense, is at stake. 
However, this clause is used for nearly every purchase the 
Army makes.    Between 1993 and 2003 the Army made more than 
700 acquisitions and only nine were put out for public 
tenders. 
 
----------------------------- 
NO PATRIOT ACT HERE 
----------------------------- 
 
7.  The state seems reluctant to grant law enforcement 
authorities additional powers to strengthen their ability to 
fight corruption. Attorney General Marie Benesova has asked 
for an additional 50 prosecutors to go after corruption. 
Justice Minister Pavel Nemec, who is seeking her dismissal 
(Reftel) has so far refused her request.  There is also great 
sensitivity about the potential for abuse of personal data, 
and the overuse of wiretaps.  The senior opposition party, 
ODS, tried to rewrite the wiretap law saying that if no 
criminal case had been opened two months after the wiretaps 
began, then officials would have to notify the citizen of the 
wiretap and inform them that they could file a suit against 
the state for unfairly violating their rights.  This proposal 
was voted down in parliament, but reflects a cultural bias 
against giving the state too many investigative tools. 
 
8.  In light of Czech history, in which citizens were under 
the supervision of the Austro-Hungarian Empire, the Nazis, 
and then the Soviets, it is perhaps understandable that many 
are reluctant to give authorities too much power.   In the 
same vein, citizens feel fewer obligations when it comes to 
the state and public property.  There is even a Czech saying 
that those who don't steal from the state, cheat their 
families. 
 
---------------------------------- 
-------------------------------- 
NO INTEREST IN CONFLICT OF INTEREST LAW EITHER 
---------------------------------- 
--------------------------------- 
 
9.  Czech officials have also dragged their feet on any 
progress towards passage and implementation of a meaningful 
conflict of interest law. The first conflict of interest law 
was passed in 1990.  The first time all required individuals 
filed the mandatory disclosure documents was in 2004, 
fourteen years later. Nobody was punished or sanctioned for 
failing to file in all those years.  Amendments to strengthen 
the 1990 law,  drafted with the help of Transparency 
International, would have, among other improvements, altered 
local election rules.  The constitutional court ruled this 
June that election rules can only be changed with the 
approval of both houses of parliament. Since the senate 
vetoed the amendment last year, the country has been left 
without an effective conflict of interest law. Petr Stepanek, 
 a councilor with the Green Party, a member of the Prague 
city council anti-corruption commission, and a member of 
several NGOs promoting transparency and accountability in 
government,  says the most recent proposal on conflict of 
interest is a bad law.  But he also adds, a bad law is better 
than no law, and therefore he and others, such as 
Transparency International, will probably support it. 
 
10.  Stepanek pointed out some of the shortcomings of the 
proposed bill.   First of all,  the new bill, like the 1990 
bill, doesn't require unpaid members of a city council to 
disclose anything.   Stepanek estimated that in the past 
&100 percent8 of city officials have simultaneously held 
down paid positions with commercial firms, usually ones 
bidding on city contracts.  (Stepanek said Prime Minister 
Jiri Paroubek had five paid positions while in an earlier job 
in charge of Prague's finances.)  In many cities, 
particularly outside of Prague,  a position on the city 
council is a part-time job.  Stepanek argues that corrupt 
officials can simply make these part-time positions unpaid, 
and continue to draw handsome salaries and kickbacks from 
commercial firms doing business with the city governments, 
all without any obligation to disclose this income. 
 
11.  In addition, Stepanek explained that the new proposal 
removes the need for spouses of government officials to 
disclose their assets.  The new proposal will also, in 
Stepanek,s opinion, not eliminate problems with deals 
between officials and &close persons,8 meaning relatives,former business 
contacts and the like.  Finally, Stepanek 
argues that under the 1990 bill,   the upper house of 
parliament kept an eye on the lower house of parliament and 
vice versa.  Under the new bill, each house will police 
itself, an arrangement that Stepanek feels will lead to few 
investigations. 
 
12.  The new proposal passed its first reading in August, 
2005, and has been set aside for 90 days of discussion before 
the second reading.  This could take place late in November 
at the earliest.  Stepanek predicted that all the parties in 
parliament will be against passage of the new proposal.  But 
he felt the senior party in the ruling coalition, CSSD, 
might be able to score some political points by passing it in 
the lower house and then sending it to the ODS-led Senate 
just before the election.  He predicted that ODS would then 
veto it, laying themselves open to criticism on one of the 
issues they are weakest at, corruption. 
 
-------------------------------------------- 
--------------------------------------------- --- 
A NEW ODS GOVERNMENT WOULD BE UNLIKELY TO SOLVE THE PROBLEM 
-------------------------------------------- 
--------------------------------------------- ---- 
 
13.  When the latest proposal was first introduced, some of 
its proponents wanted to include members of local governments 
and family members. ODS, which is expected to garner the most 
votes in next year's parliamentary elections,  reacted by 
posting on the party's official web site, a note saying ODS 
was always willing to discuss such a bill, and would be 
willing to support it, if it didn't ¶lyze the activities 
of local and regional representatives,  or excessively limit 
personal freedom and the right to privacy, and that the 
circle of people touched by the bill is reasonable so that 
family members are not persecuted.8 
 
14. ODS' opponents generally argue that ODS is the party 
least likely to fight corruption.  The argument that is made 
is that ODS is in charge of 13 of the country's 14 regional 
governments, and the majority of the country's municipal 
governments.  Since most construction projects take place at 
the municipal or regional, rather than national level, ODS is 
in the best position to benefit from overpriced or 
unnecessary construction projects. 
 
15.  Further evidence of the ODS position on corruption can 
be seen in the party's reaction to a Transparency 
International questionnaire. In the fall of 2002, 
Transparency International sent six questions to 1025 
candidates running for positions in the city councils across 
Prague.    Roughly 30% of the candidates responded to the 
poll.  Each of the five parties with current representation 
in parliament had 70 candidates running.  The Christian 
Democrats had the most respondents, 28  of 70,  followed by 
the Social Democrats with 22,  the Communists with 12, 
Freedom Union with 10 and ODS with just 1. Three of the 
parties;  The Christian Democrats, the Social Democrats and 
the Communists, helped Transparency International distribute 
the questionnaires to their candidates.  ODS refused to get 
involved. 
 
--------------------------------------------- --- 
EXPOSED DOESN'T MEAN PROSECUTED 
--------------------------------------------- ---- 
 
16.  Cases of corruption are exposed. But almost without 
exception,  headline grabbing stories quickly die down, or 
are replaced by the next sensational scandal, and nobody is 
ever held to account.  The following are all stories that ran 
in the main Czech dailies between June 9 and June 16, 2005. 
In the three months since then, no arrests have been made or 
fines levied in connection with these cases.  In addition, an 
internet search shows that no news articles on these scandals 
ran after the initial wave of publicity. 
      - The Ministry of Defense is looking into a no-bid 
contract for more than US$80 million that went to an 
engineering firm run by a former MOD employee.  The contract, 
to destroy old surplus ammunition, was let by the same 
department the    former employee used to be the Director of. 
  In addition,  the engineering firm is controlled by 
Omnipol, the boss of which was for a time paying the rent on 
the house of the Deputy Defense Minister, who was the 
supervisor of the former MOD employee. 
      - One of the main national dailies featured front-page 
photographs of the Justice Minister running a red light and 
driving     the wrong way down the tram tracks to avoid 
traffic delays. The paper also ran a page two photo spread of 
the Defense Minister illegally driving on the tram tracks on 
his way to a vote in parliament. 
      -The Agriculture Minister awarded a grant for $180,000 
to help a very small village connect to sewer lines.  The 
Minister's wife's family has owned a rundown spa in the 
village for years and has been trying to renovate, but can't 
do so until the facility is connected to the sewer lines. The 
Minister refused to acknowledge any conflict of interest. 
The Prime Minister only said that the Agriculture minister 
was "inexperienced, but not dishonest." 
      - Three members of a committee at the Ministry of the 
Finance were turned in by a firm from which they requested a 
payment of US$ 2 million, in exchange for steering contracts 
towards the firm. 
      - A policeman with responsibility for financial affairs 
at Prague City Hall resigned after it came to light that he 
had accepted a US$200,000 loan and an expensive vacation from 
a crooked soccer boss who had a criminal case pending in 
Prague. 
      - 159 Czech soldiers serving in Kosovo were caught when 
they took delivery of two sets of new uniforms, but signed 
documents saying they only received one set. 
 
17.  In the late 1990's, the Klaus-led ODS government was 
brought down by the perceived excesses of a wild-west 
capitalism.  30 of the 60 existing banks went bankrupt,  700 
of the 800 licensed securities dealers had their licenses 
revoked. This led to the creation of The Unit for Serious and 
Economic Crimes within the state prosecutor's office.  That 
office takes on any case in which damage to the state is over 
50 million Crowns (US$2.2 Million) or the combined damage to 
individuals is over 100 million Crowns (US$4.4 Million).  But 
prosecution of run of the mill bribery, or abuse of power, is 
left to lower level district prosecutors,  who typically have 
more than 200 cases to work on, must be in court three to 
four days a week, and have neither the time, the resources, 
nor the training to conduct investigations into allegations 
of corruption. 
18.  The EU,s DG for Legal Affairs published a report on 
corruption in the Czech republic at the end of 2002.  In the 
conclusion, the report states that &There is an astonishing 
discrepancy between the generally accepted existence of an 
environment vulnerable to, and affected by corruption, and 
the absence of a high number of corruption prosecutions." 
Little has changed since that report was published.  The 
World Bank publishes an assessment of Governance and 
Anticorruption every two years.  The assessment is a 
compilation of indices provided by more than a dozen experts 
and NGOs in each country.  The numbers for the Czech Republic 
reflect a consistent decline in the government's response to 
the problem over the last ten years. 
 
                        1996        1998        2000 
2002        2004 
Government Effectiveness      81.6        80.3        74.7 
75.1        71.6 
Rule of Law             73.5        73.5        72.2 
72.4        69.9 
Control of Corruption         77.3        72.7        73.1 
66.8        66.0 
 
19.  In a mature two-party system, such as the one found in 
the US, each party can keep an eye on the other.  But in the 
Czech Republic, particularly over the last 2 election terms, 
parties have instead shielded each other.  In the current 
coalition of 101 members in a 200 seat chamber, the coalition 
can not afford to alienate a single member.  In the previous 
electoral term, the two main parties signed what became known 
as the opposition agreement and to a large extent split up 
the spoils.  This has opened the door to alternative parties, 
and to a certain level of protest votes, the main beneficiary 
of which has so far been the Communist party.  That party's 
web site ran a speech on June 9, 2005 by Karel Klimsa, deputy 
chair of the party's central committee.  In the speech, 
Klimsa said, "We want to show the voters that we are 
different, that we have a different morality, that politics 
for us isn't just a business, that it isn't trafficking with 
the public interest." 
 
--------------------------------- 
IRRITATED, NOT INCENSED 
--------------------------------- 
 
20.  CONCLUSION:  In the old days,  everyone had to engage in 
some sort of fiddle just to get by.  With the development of 
a robust market economy,  corruption is increasingly becoming 
the reserve of the politically powerful and their businesscronies.    The 
public resents that.  A poll on September 6 
found that the one thing that bothered Czechs most was 
corruption.  83% of respondents said corruption bothered 
them.  A separate poll earlier this summer showed that the 
Czech public thinks political parties are the most corrupt 
institutions in the country.  This helps explain the 
popularity of the unreformed communist party,  which has not 
been a part of any post-89 government, and consequently 
benefits from a significant protest vote.  It also offers 
some hope to the small parties such as the Greens, that 
couldn't make it over the 5% threshold needed for 
parliamentary representation in 2002.   But the voters don't 
seem outraged enough to force the parties currently in power 
into taking meaningful steps to reduce corruption, punish 
wrongdoers, or throw crooked politicians out of office.  In 
the September 6 poll, only 52% of respondents said they were 
dissatisfied with the political status quo.   The fact that 
corruption is widely acknowledged, yet tolerated, might be 
the most discouraging news of all. 
 
 
CABANISS