Let's make a deal
By : Jeffrey Sparshott
Antoni Kaminski, chairman of Transparency International, keeps a file with about 60 corruption cases under investigation in Poland. Some are relatively small, such as the case of the Gdansk doctor who accepted a bribe or the Warsaw bureaucrat who wouldn't allow a tenant to buy an apartment she had lived in for several years. But these are the types of corruption that undermine faith in government.
"People come to us in a state of exasperation, so we look at their documents and we start proceedings," Kaminski said. The press and the government are then brought into the often slow process of combating corrosion within the system.
Julia Pitera, a Warsaw councilwoman, heads up Transparency International's two-year-old intervention program. She and a group of five volunteers from Warsaw University investigate the cases and push for resolution. "We do it because we're interested in these problems," she said. "They're about the way we live."
The 60 cases are just a small part of a large problem, according to a variety of international and domestic surveys and reports.
"The credibility of the state is low and links between political and economic spheres are too close," the World Bank wrote in October 1999. "There is little respect for the judiciary. The organizations needed to ensure accountability, transparency and audit are still finding their feet.
"In the public administration and public services, the vacuum created by the loss of old rules and controls has not yet been filled by new mechanisms of accountability, and habits of work are slow to change.
"And the new democratic principles including the key concept of conflict of interest are either not well understood or not well respected."
While the bank cites instances of progress, a new report last year indicated damaging institutional corruption, including continuing close links between economic interests and political institutions, cronyism and conflict of interest in appointments to regulatory bodies, boards of privatization, state-owned enterprises and funds. Tax exemptions, concessions and licenses, and malpractice in public procurement are also trouble spots.
The abuse of public office for private gain appears to run from high levels of the government down to some of the most basic services. But according to Kaminski, high-level corruption is the gravest problem. "I think the corruption we have here, political corruption, is the worst possible," Kaminski said. "That is the worst kind because, until we address it, it is difficult to address other kinds."
Transparency International, a non-governmental organization based in London and with an office in Warsaw, consistently ranks Poland poorly on its corruption perception index. Last year the country fell to No. 43, on par with Belarus, Lithuania, El Salvador and Malawi.
Tackling the problem
The good news is that the attention being paid to the problem of corruption is helping eliminate it. The reports have been a catalyst for anti-corruption activities, said Jacek Wojciechowicz, an external affairs officer with the World Bank and a co-author of the bank's corruption studies on Poland. A high-level group, led by National Bank of Poland President Leszek Balcerowicz, is one example of top government officials tackling the difficult problem, he said.
The bad news is that corruption is still an established feature at various levels of government that few want to discuss. It is also difficult to root out. At one level, it is a nuisance for citizens who encounter dishonest police, bureaucrats or businessmen. At another level, it is hindering the country's economic development.
"We believe that corruption is one of the problems that is preventing faster economic growth," Wojciechowicz said. According to the latest World Bank report, tax, customs and privatization revenue are lost, investment is curtailed, services are hindered, and confidence in public institutions suffers.
The bank and Transparency International are not alone in their criticism. An audit by Poland's Supreme Board of Inspection (NIK) found that "in the practice of public administration activity there function no systemic solutions designed to counteract corruption." The European Bank for Reconstruction and Development (EBRD) notes that "corruption and a complex system of licenses and red tape hinder some investors." And the European Union (EU) has hinted that corruption, money laundering and organized crime might affect union accession.
In the fight against dishonest deals, Poland is sometimes hindered by inadequate legislation but more often by an inability to implement anti-corruption laws. " (I)n general the emphasis has tended to be too much on passing laws rather than implementing them effectively," the World Bank said.
"It is very difficult to successfully uncover corruption," said Steve Baczynski, resident legal adviser for the U.S. Department of Justice in Warsaw. Laws are on the books but crime agencies don't necessarily have the tools to investigate and track corruption, he said.
Janusz Wojciechowski, president of NIK, is Poland's top auditor in the fight against corruption.
Inadequate tools and follow-up are problematic on several fronts. Under a 1997 law, for example, government officials are required to make asset declarations. They are usually filed but following an investigation by NIK, it became apparent that the declarations are rarely verified, according to Janusz Wojciechowski, NIK's president. "This check that we performed on the anti-corruption act; the results are an example of the problem with enforcement," he said, adding that he hoped new legislation would allow the declarations to be compared with tax statements.
A bill settled in the Sejm would have the office of fiscal control verify the declarations by comparing them to tax reports and would open the declarations to public scrutiny, though its sponsor is not optimistic that it will pass. "It has a stick, but no carrot," said Ludwik Dorn, a member of the Movement for the Reconstruction of Poland-Center Alliance (ROP-PC), explaining his colleagues' reluctance to support the bill. Dorn is more optimistic about a campaign finance bill, which would eliminate corporate contributions, limit individual contributions and provide state funding to political parties.
"I think that it will help to curb corruption in Poland," Dorn said. "The legislation about political party financing and electoral campaigns I think will be passed because it ... has support from all major political forces."
If effectively implemented, that would be a step in the right direction, according to observers, because campaign financing is often used to curry political favor.
While new legislation would help here, effective implementation of existing laws is crucial in other areas.
Public tenders
Wojciechowski said laws related to public tenders, for example, are not well enforced, especially at a local level. At the national level, there are cases of strangely arranged tenders tilting open competition toward certain bidders. In the case of U.S.-based rail car manufacturer Greenbrier and its Polish subsidiary, the company allegedly ran into Polish State Railways (PKP) managers who wanted to ensure the sale of railcars to a predetermined consortium.
"Certain individuals within PKP conspired to form a consortium to monopolize the sale of rail wagons to PKP," said Peter Nevitt, chairman of Greenbrier Europe, in testimony to the U.S. Senate last year. According to his statement, Consortium Taborowe is made up of PKP and other Polish companies, including three rail wagon manufacturers. The consortium is 90% owned by PKP and the state-run company's executives in charge of equipment acquisition are the principle officers of the consortium. At the direction of the key officers, PKP granted the consortium the exclusive right to issue rail wagon tenders on the company's behalf.
"Not surprisingly, the Consortium Taborowe awarded the entire contract for 4,500 wagons to its own members," Nevitt said. "The bidding procedure adopted by PKP in this case did not begin to meet the requirements for transparency required by the United States, the European Union and the international financial institutions such as the World Bank and the EBRD."
Intervention by several U.S. senators, the Clinton administration, the U.S. State Department, the U.S. Commerce Department, the U.S. Transportation Department, the U.S. Embassy in Warsaw, the Polish ambassador in Washington, D.C., the Polish government and a new PKP chairman contributed to cancellation of the tender, according to Nevitt's testimony. And the Greenbrier case, while not yet resolved, may yet have a happy ending. A new tender was closed Jan. 29 and this time Greenbrier is the only bidder, according to Dariusz Czernik, sales director for Greenbrier in Poland. It is still not clear if the tender will be awarded and how the financing will work, but the company is hopeful. "It needs cooperation between two partners," Czernik said.
Based on the level of foreign direct investment in Poland and the readiness of many multinational firms to jump into the market, happy endings would not appear uncommon. Still, there is a clear perception and recognized threat of corruption. NIK found that privatization, especially, is a potential major problem due to the large amount of money involved. Wojciechowski said that a shortage of goals and a lack of transparency overshadows privatization procedures, leading to some questionable sales as Poland gets rid of state assets.
Janusz Lewandowski, a member of the Sejm belonging to the newly formed Citizens Platform (PO) party and the country's former privatization minister, said that privatizations are closely monitored and no proof of wrongdoing exists. "At the beginning there was an ethos of converting public property into private property," he said. "However, with time it became more routine and open to the same dangers as the other elements of the bureaucratic machine. So far there is no evidence of corruption revealed. However I cannot exclude the risk."
NIK, however, found several instances of questionable activity. "In the early 1990s, every privatization was affected by corruption risks," Wojciechowski said. "We could transfer all those cases to the prosecutor." According to NIK estimates, faulty valuations and questionable advisory services cost the state about zl. 85 million ($20.7 million) during the privatization of the Domy Towarowe Centrum department store in downtown Warsaw.
Special purpose funds
Another area of concern is Poland's special purpose and agency fund operations. Within overall government finances, about zl. 150 billion ($36.5 billion) is effectively off-budget, outside tight Finance Ministry control and subject to limited public scrutiny. Compared to 2001's budget of zl. 182 billion ($44.3 billion), that amount is significant. The largest blocks of funds are the Social Insurance Fund, Farmers' Social Security and the Labor Fund.
"It appears that companies, which can reportedly include officials of the parent ministry or their connections, are sometimes formed around these agencies in order to benefit from their activities including contracts. This is a clear conflict of interest and abuse of public funds," the World Bank said.
Wojciechowski said the funds are not completely without external control. But NIK has concluded that control is weaker than it would be inside the budget; the funds should be reduced because of the risks inherent in their nature; and their functions and mission would be better achieved inside the budget.
Despite the obvious and hidden problems, Wojciechowski said he is an optimist and that corruption can be successfully combated. His optimism is echoed by other officials closely monitoring Poland's efforts to raise ethical standards.
"What we've noticed, thanks to publicity, is that permissiveness is decreasing," said the World Bank's Wojciechowicz. "But it will take a long time for Polish society to change in terms of how it respects the law."
