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RKN Global on Corruption by Local Public Officials

The mayor of Paterson, New Jersey was recently accused of public corruption charges, allegedly involving a bid to provide members of his family with free labor by getting tax payers to pay the workers’ salaries.1 The charges allege that Mayor Jose Torres and three other staff members hired municipal employees to work in a warehouse that had been leased by the mayor’s family.2

Normally, hiring someone to work for family doesn’t sound like such a big problem. But in this case, the arrangement was allegedly carried out at the expense of the tax payers. These alleged acts included conspiring to pay workers for overtime, while exploiting public funds for the benefit of the mayor’s family. The company which was set to benefit from the free labor was known as “Quality Beer”, located in the city of Paterson.3

RKN Global founder, Ronald K. Noble, notes that the use of taxpayer money needs to be tightly and transparently controlled so the public’s money is only ever used in an appropriate way.

What is corruption?

Corruption often involves the abuse of power for private gain.4  It can have many consequences, costing people their money, freedom, and in some cases their lives.5

In addition to the charges being brought against the mayor, three individuals who worked with him were also charged with the same crimes. The mayor, along with Joseph Mania, Imad Mowaswes, and Timothy Hanlon, have face six charges in total:

  • Theft by unlawful taking or disposition
  • Falsifying or tampering with public records
  • Pattern of official misconduct
  • Conspiracy
  • Falsifying or tampering with records
  • Official misconduct7

Undermining public trust

The mayor’s case highlights issue of a public official misusing a power that was entrusted to him for the public good. 

The trust that the public had put in their mayor seems to have been undermined by his alleged behavior. In 2002, Mayor Torres ran an anti-corruption campaign against Martin G. Barnes, who had served as mayor of the city before Torres and had previously been charged with extortion.8 Mayor Torres has in fact been a part of another lawsuit which involved city employees reportedly being paid overtime for carrying out work in his home.9 It seems that the most recent allegations  that lawsuit share a common theme: Using public funds to achieve private gains.10

The current charges allege that carpentry, electrical, and painting work had been carried out by municipal employees in 2014 and 2015 at the taxpayers’ expense.11 The warehouse, which is owned by the mayor’s daughter and nephew, is thought to have been used as a distribution facility as part of their wholesale liquor company.12

How to protect yourself from corruption

While we as individuals may not be able to protect ourselves from corruption, whether it’s being carried out by those who work in our government, or the businesses we work for, we can refuse to partake in activities that may not be legal.14 It is important to report anyone engaged in corrupt activity.15

Mayor Torres and his three city employees face up to 10 years in prison for the charges.16  The mayor continues to protest his innocence and says that the charges have left him “extremely disappointed and surprised.”17

Ronald K. Noble, founder of RKN Global urges governments and businesses to work together to combat corruption and foster a culture of integrity.

Corruption affects the lives of millions—even billions– of people all around the globe. While it may be impossible for governments and authorities to fight corruption in “one big sweep”, working on a case by case basis can help.18

Ronald Noble, RKN Global’s founder, on Corruption’s Finding Opportunity: Sports and Referees

We have previously discussed that corruption abhors a vacuum, and whenever there is an organizational or institutional structure, gaps and opportunities in that structure will be exploited for corrupt purposes if the costs do not outweigh the benefits for the perpetrators.  In the realm of sport, we have examined how tennis, which as a one-on-one sport (at least in singles tennis) allows one player a great deal of power to alter the outcome of the game, presents extra opportunities for corruption because the game is simpler to fix.

RKN Global’s founder Ronald Noble draws attention to the fact that while not all sports share the small player-count of tennis, some nevertheless put a great deal of power over the course of the game into the hands of one person with a different role: the referee.

While there have certainly been more recent examples, a case of referee corruption from a few years ago still illustrates so well how the combination of a referee’s opportunity and base human instincts can combine to bring about corruption.  In 2013, a Singaporean match-fixer named Ding Si Yang reached out to a Lebanese referee named Ali Sabbagh, who, along with two colleagues, was in Singapore to officiate at an April 3rd Asian Football Confederation soccer game.  Ding reached out to Sabbagh and his friends, setting them up with prostitutes as a bribe to incentivize them to fix the April 3rd game.

A famous basketball case also shows the power of a referee and how that power provides a tantalizing bait for those who might succumb to corruption.  Tim Donaghy was a successful basketball referee, having moved up the chain from refereeing college games to the NBA, where he officiated at almost 800 games over the course of thirteen years. 

In Donaghy’s case, gambling and its addictive properties provided the impetus for him to corruptly abuse the power he held over the sport. For two seasons, Donaghy placed bets on games at which he officiated.  While he denied to authorities that such betting—which is a clear conflict of interest—affected the objectivity of his performance as a referee, any outside observer would have trouble believing this to be true:  Donaghy’s successful bets attracted the attention of professional gamblers, who shadowed his bets and made an unusually large windfall.

Those inclined to believe Donaghy’s claim that he did not fall victim to corruption might claim that the inside information with which he was armed, including information about the starting lineups of the games, player injuries, and team morale, was sufficient to enable him to bet correctly without actually corrupting the outcome of the game himself.   Needless to say, this is hard to believe.  But even if it were true, making bets based on inside information is itself corrupt.

Ronald K. Noble, founder of RKN Global, qualifies that structural weaknesses such as a referee’s tremendous power over the outcome of a game do not necessarily constitute the motivation that drives a referee to become corrupt and fix a match. Instead, it provides the opportunity for corruption when the motivation—be it bribery with sexual favors, a gambling addiction, or some other incentive—manifests itself.

The awareness of structural weaknesses as a magnetic opportunity for corruption in sports—and indeed, in all areas—provides law enforcement as well as private organizations with a guide to where to focus their limited resources and attention when it comes to anti-corruption prevention and enforcement efforts.

Ronald Noble, RKN Global Founder, on Systematic Corruption

Ronald Noble, Founder of RKN Global, discusses the importance of systemic corruption in encouraging further corruption.

Over the course of almost three decades in national and international law enforcement, including 14 years at the helm of INTERPOL as its Secretary General, I became extremely familiar with many of the patterns, factors and influences relating to different types of corruption and crime. 

One of those factors I discussed in a previous article on corruption in government:

“One of the factors that makes it more likely for people to engage in corruption is a pre-existing culture of corruption.  If the situation in a particular company, institution or government has gotten so bad that bribery, extortion and other types of corruption become commonplace, then it is even easier for others to participate in acts of corruption.”

A New York Times opinion piece the day after my article makes a similar argument after surveying the slew of corruption allegations and scandals that seem to have swept over countries throughout the world, from the impeachment last Friday of President Park Guen-hye of South Korea over her connections to a back-room adviser involved in extorting money from conglomerates, to the impeachment of Brazil’s president in August and the arrest of two governors, to the collapse of the Guatemalan government’s collapse over bribery allegations involving the President and Vice President, and to corruption officials against Argentina’s former President.

The article examines the theories of Professor Raymond Fisman of Boston University, who focuses on the study of systemic corruption.  Fisman supports my argument that systemic corruption makes further corruption more likely.  He argues that corruption is best understood in light of a social and economic equilibrium in a particular system, whether it be a sporting team, government, or company.  When the equilibrium is such that there is not a lot of corruption, then someone doing something corrupt—extorting another, or soliciting a bribe—then the act of corruption is dangerous, because the corruptor might be reported and get in trouble.

On the other hand, Fisman notes, “if everyone around you is paying bribes, the cost-benefit tradeoff flips. . . As more and more people engage in corruption, you’re better able to find willing partners in crime.  And the benefits of staying honest decline” because everybody is engaging in corruption, and you can’t get ahead without joining in.

Fisman suggests, as I did, that the fact that independent actors within the system—“islands of honesty” like prosecutors or courts– are willing to challenge corruption is a good thing, and offers hope of turning the system around.

RKN Global founder Ronald K. Noble blogs about and analyzes corruption at rknglobal.info.

Ronald Noble, RKN Global Founder, on Political Corruption in Brazil

The year 2016 has seen the President of Brazil, Dilma Rousseff, removed from office over charges of corruption, the politician who headed her ouster, Eduardo Cunha, jailed on corruption charges, and two former governors of the province of Rio de Janeiro (within which the city of Rio de Janeiro is located), Anthony Garotinho and Sergio Cabral, arrested for voter fraud and corruption, respectively. 

Now, as the new President of Brazil, Michel Temer, faces allegations of corruption, a member of his government has just been removed from his position as president of the Senate because of his indictment for corruption, specifically on embezzlement charges.

Ronald Noble, RKN Global’s founder, notes that one of the factors that makes it more likely for people to engage in corruption is a pre-existing culture of corruption.  If the situation in a particular company, institution or government has gotten so bad that bribery, extortion and other types of corruption become commonplace, then it is even easier for others to participate in acts of corruption.

The most recent manifestation of the growing scandal of corruption in the highest echelons of Brazil’s government relates to Renan Calheiros, a member of Brazil’s Senate who was removed from his post as head of the Senate by order of a justice of Brazil’s Supreme Court.

The judge ordered Mr. Calheiros removed from his position because the president of the Senate is in the line of succession for the Presidency, because Mr. Calheiros is being indicted for an embezzlement scheme, and because no one in line of succession for the presidency can be a person who is under indictment for corruption.

Specifically, the indictment against Mr. Calheiros harkens back to 2007, alleging that he arranged for the use of Senate funds to pay child support for a daughter that he had from an extramarital affair.  In particular, the payments were made by a construction company, which then billed the Senate for the payments, thus constituting the embezzlement of public funds.

In addition, Calheiros is the subject of eleven corruption investigations.

RKN Global’s founder Ronald Noble acknowledges that it is difficult to clean up an institution or government that is systemically rife with corruption, but nevertheless it is possible.  The fact that a government investigates and brings to justice those in positions of power is itself a positive sign for the country’s democracy and a sign of hope for the possibility of change.

RKN Global on Conflict of Interest and its Role in Corruption

A British football manager was given a three year suspension from the sport by the sport’s national governing authority, the Football Association, after he admitted to betting against his own team.  His case highlights an important factor in corruption in general, and in sports corruption in particular:  The role of the conflict of interest.

The manager of Frome Town football team admitted to charges that he placed bets against both Frome Town and his former team Paulton Rovers, yielding himself a £1,924.29 profit.

RKN Global’s founder, Ronald Noble, warns that corruption is largely a function of opportunity.  Human nature is such that many people will engage in corrupt activity if the opportunity arises.  One of the keys to combatting it, then, is to keep people far away from the situations in which corruption is more likely.  Conflicts of interest are a major example of such a situation.

Conflicts of interest lead to corruption because it creates an incentive that runs against the obligation of the person with the conflict.  In the instant case, for example, a team manager’s job is to do everything he can, within the rules, to help his team win.  If he bets against his team and stands to make money if they lose, then he now has an incentive for them to lose, a reason to not fulfill his obligation to try and help them win, and even a reason to sabotage them so that they lose.

For this reason, the official rules of football (soccer), along with other sports, forbid betting against one’s own team by anyone involved, including players, managers, and coaches.  Many sports, like football, have additional bans that extend further to prohibiting betting on the sport by those involved in the sport.  Even the appearance of corruption can damage the sport, eroding public confidence.

Ronald K. Noble, founder of RKN Global, notes that the rules prohibiting conflicts of interest are essential precisely because they are designed to keep people out of situations where they will more easily succumb to corruption.

The Frome Town manager claims that he did not engage in match-fixing or do anything to try to get his teams to lose, but rather used information—like knowledge about which players were injured or unavailable for the specific games—to help him guide his betting.  The Football Association believed that he did not actually engage in the corruption of match-fixing, and sentenced him to three years’ suspension.

It is certainly possible for someone to act properly even with a conflict of interest, much as it is possible that a child puts his hands in the cookie jar just to examine the cookies, and not to eat any.  But it is not so in the majority of cases.   Prohibitions on conflicts of interest are important elements in the battle against corruption.

Ronald Noble, founder of RKN Global, draws attention to the fact that conflicts of interest are certainly not relegated to sport, and can be found in almost any field of human endeavor, including government and business.

RKN Global on Political Corruption: The Alleged South Korean Scandal

At the time of this writing, a fourth weekend of large public protests has taken place in South Korea.  The protests are directed against the country’s president, Park Geun-hye, who stands accused by prosecutors of conspiracy to commit extortion and abuse of official power.  Ms. Park has not yet had her day in court, so this article makes no claims as to the accuracy of the allegations. (Indeed, she enjoys immunity from prosecution while she serves as President).  However, the allegations themselves yield a picture that is worth examining, because the phenomenon of corruption at the highest echelons of power does occur, whatever the ultimate truth of these allegations.

RKN Global’s founder, Ronald Noble, underscores the damage that the corruption allegations are causing to President Park’s ability to govern and to the national morale of South Korea.

President Park has allegedly allowed classified and detailed political information to be obtained by her friend, Choi Soon-sil.  Park has known Choi Soon-sil for decades, back to the time when her father, Park Chung-hee, held power in South Korea, before the establishment of the country’s democracy.  Furthermore, prosecutors allege that she helped Choi Soon-sil use her closeness to Park to extort money from businesses.

Prosecutors accused Choi Soon-sil of using the threat of government retribution to force 53 major companies, including Samsung and Hyundai, to donate millions of dollars to her foundations, and to divert millions of dollars of contracts to her private businesses. 

Ronald Noble, founder of RKN Global, asserts the absolute importance of transparency on behalf of political leaders, so that they can not only avoid corruption, but even the appearance or accusation of corruption.

While President Park enjoys immunity from prosecution while she is in office, her ability to govern with large swaths of the public and numerous members of the government, including members of her own party, opposed to her.  She has refused numerous calls for resignation and hunkered down, even as her some of her aides face indictment.  In the business of running a country, it is hard to see how a leader so embattled—regardless of the accuracy of the allegations—can govern adequately.

Another aspect of the corruption that is worthy of note is the nature of the alleged acts of President Park and Ms. Choi.  The legitimacy of the President’s acts does not depend upon whether her friend was trustworthy, or whether her foundation and businesses were worthy of contributions or donations.  If true, it is the illegal manner in which Ms. Choi had access to classified information without clearance, and the corrupt manner in which donations were solicited and contracts obtained, which is morally and legally problematic.