Blog (Eng)

By Markus Pohlmann

The accused was a renowned figure in Bottrop, a town in North Rhine-Westfalia. He is a veteran pharmacist licensed to produce cancer drugs. The pharmacist is accused of having diluted and adulterated the cancer drugs, so that they lost their effectiveness. According to the investigations by the public prosecutor‘s office in Essen, at least 3,700 patients are affected nationwide. However, due to the limitation period, only cases of the last five years were evaluated. According to the prosecution, this pharmacist from Bottrop had supplied 37 medical practices and clinics with falsely dosed anti-cancer medicines over the past five years. Most of them are located in North Rhine-Westphalia, but also in Rhineland-Palatinate, Baden-Württemberg, Saarland, Saxony and Lower Saxony. According to the research of Panorama and Correctiv, the accused pharmacist had, through adulterated cancer drugs in 60,000 cases in 2005, supplied more than 7,300 people with the 49 active ingredients that are currently listed as manipulated active ingredient by the Public Health Bureau of Bottrop (Stadt Bottrop 2017). Many patients do not seem to have been informed of this at all or much too late. Next Monday, the 13th of November, marks the opening of the trial of the pharmacist, who has been detained at the Wuppertal prison for one year. He has kept silence so far on all allegations.

The whistleblower

It’s not the police department but rather the newly hired commercial director and a pharmaceutical technician of the pharmacy who put the investigation authorities on the track. Since no authority in Germany has any control on the pharmacist production of anti-cancer drugs - there are hygiene checks, but only every few years, usually pre-announced – one has to rely on insider hints. Prior to this, there were apparently already rumors and clues from employees who did resign (Correctiv). The commercial director had been looking for an opportunity to verify his suspicion that the basic substances purchased failed to correspond to the cancer drugs sold. Once he found one, he did a recalculation. And as a matter of fact: 16,000 milligrams of the cancer drug Opdivo was purchased, for example, but that was 36,000 milligrams short when measured against sales. Thanks to the diluted cancer drugs, the already huge profit margin was multiplied. It is estimated that €615,000 could be realized in profit per year from the sales of this cancer drug alone. After the commercial director verified his suspicion for several times, he finally turned to a lawyer he befriended. Together with his lawyer, the commercial director wrote a criminal complaint about commercial fraud. The public prosecutor’s office launched an investigation but more evidence was needed.

The pharmaceutical technician thereupon took along an infusion bag, which was a returner. It was analyzed and one month later, there was a raid. The pharmacist got arrested and signed the firm over to his mother. The new owner immediately dismissed both the commercial director and the pharmaceutical technician, pointing out that one could have resolved this issue internally. The commercial director has been unemployed so far but now, along with the pharmaceutical technician, he receives a whistleblower award from the lawyer initiative IALANA (International Association of Lawyers against Nuclear Arms).

From a sociological perspective, it is exciting to engage with Whistleblows for two reasons. On the one hand, companies are also called upon to expose deviations from rules, the detection of which harms them massively. Their incentive structure then lies in, for instance, to escape "draconian punishments" in the event of revelation of illegal practices through "self-reporting". On the other hand, people who do the right thing risk their careers and reputation but are often stamped as traitors.

The effectiveness of whistleblower programs

In the case of organizational deviance, deviations from rules, such as what happened at the pharmacy in Bottrop, are up until their discovery for the benefit of the company or its owner. But often, no third parties suffer such massive damage as they did in the Bottrop case, and moral obligation to blow a whistle is not as strong as in this case. In the Bottrop case, it is rather astonishing that for how long this presumably criminal practice of the pharmacy, which is discernible for insiders and which has massive damage for the critically ill patients, had been established before it was brought to light. In many other cases, however, the benefits to businesses often relate to financial advantages that are realized at the expense of competitors or the states - with less moral appeal than that in the Bottrop case. Now the big companies in the world are for the first time redeeming this claim in form, if not in content. They establish whistleblower programs which document, for example, that one has met the expectations of the US judiciary and as a result, if the worst comes to the worst, can expect lower penalties through self-reporting and the fact that they’ve met the necessary formal requirements (f.e. of the US Department of Justice 2017). However, our research shows that in reality, these programs often replace only the organization's suggestion box or are used by employees to address human resources issues. Almost never, according to our previous research, have serious violations of rules been reported, which if applicable may be forwarded to the public prosecutor’s office. The claim is therefore often only redeemed in form; in practice, the conflict of interest remains in place at the companies.

The consequences for whistleblower

The high sums paid to whistleblowers in the US should not blind us to the fact that their former social existence and career - as in the Bottrop case - is often destroyed. Admittedly, whistleblowers are much better protected today. In the US, the number of whistleblowers is increasing, and the programs are also successful because whistleblowers can expect to be rewarded, for instance, somewhere between 10% and 30% of the money recovered from the companies by the SEC. Nevertheless, in cases such as that of whistleblower Bradley Birkenfeld at UBS, who along with whistleblower Hervé Falciani (of HSBC's Swiss subsidiary HSBC Private Bank, based in Geneva) played a part in contributing to the fact that the Swiss banking secrecy was tipped, it was displayed how hard life acctually is for whistleblowers. Birkenfeld, for instance, recounted how, in his view, the bank has tried to make its practices, which are illegal in the US, an individual problem by adopting formal prohibition rules, whereupon Birkenfeld turned to the American judicial authorities. There was a great deal of damage both to himself, who had to serve a prison sentence, but got the $75 million share later thanks to the whistleblower rules, and to the bank, which would have to pay penalty and reparation to the tune of $780 million in a deal (US Department of Justice 2009). He was stamped "traitor" within the bank and lost most of his "friends" and perks. And his career was over (Birkenfeld 2017: 143).

As long as people doing the right thing are labelled traitors or risking their careers, as in the Bottrop case, we need prizes, initiatives and programs to protect them. Even companies that do the right thing are supported by financial incentives. But we should not expect too much. Because the central issue still is that the unwritten rules at the companies are often justifying deviant behavior, and they are changing slowly, with their and our culture. Formal compliance and whistleblowing programs may be the symbolic forerunners of such cultural change, but they are not able to regulate informal practices at the companies.

Sources

Birkenfeld, Bradley (2016): Lucifer's Banker. The Untold Story of How I Destroyed Swiss Bank Secrecy, Austin: Greenleaf Book Group.

Correctiv (2017): Wie zwei Menschen dafür sorgten, dass ein Apotheker keine Krebsmedikamente mehr panscht (german), written by Anna Mayr, accessed on 10.11.2017.

Deutsche Welle (2017): Diluted cancer medication scandal spreads through Germany, accessed on 10.11.2017.

Falciani, Hervé (2015): Séisme sur la planète finance. Au coeur du scandale HSBC, Paris: La Découverte.

Geistblog (2017): Invitation Award Ceremony (german), accessed on 10.11.2017.

Jones Day (2017): FCPA 2016 Year in Review. White Paper, accessed on 10.11.2017.

Stadt Bottrop (2017): List of medicaments (german), accessed on 10.11.2017.

US Department of Justice (2009): United States of America v UBS AG. Deferred Prosecution Agreement, filed in the United States Southern District Court for the Southern District of Florida, Miami Division, Case No 09-60033-CR-COHN, accessed on 10.11.2017.

US Department of Justice (2017): Evaluation of Corporate Compliance Programs, accessed on 10.11.2017.

 

By heiGOS-Team

In the starting episode of In People’s Name, by far the most popular soup opera broadcasted in China this year, a corrupt official defended himself adamantly upon being detained by crying loudly that “I was born to a peasant farmer family”. It turns out that this son of a Chinese peasant farmer family has happily stacked away fully 200 million RMB (€25 million) of cash under the mattress. Unfortunately, this is no playwright’s fantasy. Rather, it is but the artistic representation of a real story of a mid-ranking central-government official in charge of regulating coal mining. According to media reports, several automatic cash-counters burnt out due to overheating while counting this El Dorado in Shangri-La.

Just like the sudden death of the archetypical Caribbean tyrant in Gabriel García Márquez’s magic realism masterpiece El otoño del patriarca, the unexpected fall from grace of Sun Zhengcai, communist party chief of Chongqing Municipality in southwestern China, the youngest in the 25-member Politburo, China’s supreme decision-making body, and yet another son of a Chinese peasant farmer family, set in among an eerie bout of silence followed by an uproar with a vengeance. Mr. Sun, widely rumoured to be the favourite candidate to replace Li Keqiang as China’s next premier, cut his teeth in the murky political waters in the 1990s as a local party official in Beijing’s suburban regions, and was later promoted to be the secretary-general of the communist party committee of Beijing Municipality, before joining Premier Wen Jiabao’s cabinet as the minister of agriculture in late 2006. In barely three years he became the communist party chief of Jilin Province in northeastern China, before being groomed in late 2012 along with Hu Chunhua, presently the communist party chief of Guangdong Province near Hong Kong, to be the two younger-generation members among a usually grey-haired line-up of the Politburo. Mr. Hu and Mr. Sun, according to some seasoned China observers, were loyal disciples of former President Hu Jintao and former Premier Wen Jiabao, respectively, and would form the next duo of China’s power centre in 2022, when President Xi Jinping and Premier Li Keqiang are expected to retire.

The script, however, stubbornly refused to unfold as planned. On 15 July, China’s official Xinhua News Agency announced that Chen Min’er, one of President Xi’s closest political allies, has replaced Mr. Sun as Chongqing’s party chief. During the same day’s evening news on the CCTV, China’s predominant state television broadcaster, the camera captured the image of other Politburo members attending the five-yearly National Financial Affairs Conference that was held in Beijing on 14-15 July. Mr Sun’s, however, was conspicuously missing. For the next ten days, he completely disappeared from the public and no one seemed to know of his whereabouts. On 24 July, he was officially declared to be “under investigation due to suspected serious disciplinary violations”, which in the Chinese political lexicon is a euphemism for one’s political disgrace, and usually, if not invariably, leads to some years behind bars. In a spectacular exercise of damnatio memoriae, all of the numerous photos, videos, audios, speech manuscripts and inscriptions of Mr. Sun, once a shining star on China’s political horizon, were erased overnight from official media outlets. In their stead were colourful gossips about his profligate wife, his daughter who attended Cornell University, and several illegal sons he fathered with multiple mistresses.

Mr. Sun is but the latest scalp claimed by China’s ongoing anti-corruption campaign, President Xi’s pet project since he assumed presidency in late 2012. Over the ensuing four years, according to official statistics by the Party’s Central Commission for Discipline Inspection (CCDI), well over one million party officials and members had been penalized in one way or another on charges of disciplinary violations, including 222 ministerial or vice-ministerial officials. Such an eye-popping spectacle has not been seen at least since the Cultural Revolution ended with Mao Zedong’s death in 1976. In contemporary China, where the old dream of communism had long been morally bankrupt, the empty slogan of socialism merely a laughing stock, and Mao’s catastrophic practice of Marxist-Leninism’s class struggle theory made spicier with a dose of his knack for China’s imperial court politics had resigned his political legacy to endless controversy, anti-corruption seems to be the only remaining legitimate cause that is able to mobilise popular enthusiasm and therefore could be enlisted as a powerful weapon against one’s political enemies. After all, is there a better scapegoat than corruption on which all policy failings and resulting social malaises could be blamed? It is no coincidence that during the term of office of both former President Jiang Zemin and former President Hu Jintao, three ambitious Politburo members were purged on corruption charges: Mr. Jiang rid himself of Chen Xitong, Beijing’s then party chief; Mr. Hu brought down Chen Liangyu, Shanghai’s then party chief and Bo Xilai, Mr. Sun’s predecessor as Chongqing’s party chief.

This is, however, not the sole political sleight of hand up President Xi’s sleeves, and judging from his first five-year term in office, he is certainly not content with confining his role in history to that of Rhadamanthus in Tartarus in Virgil’s Aeneid. Thanks to his powerful grip on the military, which on his close watch has just undergone nothing less than the most radical reorganization in its history, he has accumulated enormous political capital and never cringed in using them to make sure that his own men, not any of his predecessors’, be ensconced in the most politically vital positions, particularly in the heated run-up to the Communist Party of China’s five-yearly congress that will take place next week. Apart from Mr. Chen, who has replaced Mr. Sun, the other two prominent political nouveau-riches are Beijing’s new party chief and Shanghai’s new mayor. “Performance-oriented promotion system for officials must have one of performance-oriented demotion to boot”, President Xi insisted, suggesting that he is ready to dismiss whoever he deems incompetent to make room for his own picks.

More significantly, by getting Mr. Sun out of his way, he has staged a powerful challenge to an unwritten but widely acknowledged rule of succession within the Party that the current supreme leader will appoint his successor-but-one: Deng Xiaoping designated Hu Jintao, and Jiang Zemin chose Xi Jinping. Such an arrangement of political patronage, by introducing a minimal degree of checks and balances among the Party’s various factions, was expected to put to an end, for once and for all, the endless bloody episodes of China’s dynastic politics that had been going on and on for millennia. For quite a while, it had even been rigorously touted by sycophantic scholars as a more stable and feasible alternative to democratic elections in the West. However, by attacking Mr. Sun, the weaker link of a potential Hu-Sun duo that was anointed by his predecessor, President Xi has made it crystal clear that he refuses to be bound by this succession arrangement, and by extension many other, if not all, unwritten rules such as the age ceiling for members of the Politburo’s standing committee and the term limit for the presidency. Anyone who still believes that President Xi will step down in 2022 should think twice. Until then, that is, China’s anti-corruption campaign may hardly see any sign of abating.
All eyes are now upon the 19th Party Congress that will open next week. Surprises, as usual, are hard to find.

Sources

“Xi’s Corruption Crackdown”, Foreign Affairs, May/June 2015 Issue

“Xi Jinping May Delay Picking China’s Next Leader, Stoking Speculation”, New York Times, 4 October 2016

“'One million' Chinese officials punished for corruption”, BBC News, 24 October 2016

“China’s Succession Games”, The Diplomat, 24 October 2016

“China's anti-corruption overhaul paves way for Xi to retain key ally”, Reuters, 4 March 2017

“Reading Xi Jinping”, Foreign Affairs, 4 July 2017

“Curse of Chongqing?”, South China Morning Post, 18 July 2017

“From Political Star to ‘a Sacrificial Object’ in China”, New York Times, 22 July 2017

“Former Political Star in China Is Under Party Investigation”, New York Times, 24 July 2017

Picture Credits

Picture 1: Pixabay

Picture 2: By Partidul Social Democrat from Romania [OGL (http://www.nationalarchives.gov.uk/doc/open-government-licence/version/1/) or CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

By Markus Pohlmann

Sometimes, politics in Germany is more than arduous maneuvering or media-whitewashed standstill. Sometimes it is a great drama, or rather an well-versed chess game. And Angela Merkel once again showed us all with the diesel summit how it is played in Germany.

The consequences of the summit are remarkable. Volkswagen now offers new cars, for which you get a total of up to 40 percent discount, for example, if you have your Euro 4 diesel car scrapped ("environmental premium"). If you trade in your old car, you get an extra 23% discount for cars of other brands due to the so-called "conquest premium for trade-in". If you switch to electro-mobility, you can once again significantly increase this discount. Since September 1st, new regulations have been in place, so that the emissions testing can be carried out under real driving conditions. The communities worst affected by the NOx emissions and fine particulates are being soothed by funds to change urban transport systems and improve the charging infrastructure for electric vehicles. In addition, "software updates" have been made compulsory so that the type approval for the cars do not have to be withdrawn. "Hardware updates," Merkel said in an interview by Der Spiegel last week, "are expensive and technically enormously complex. We must therefore carefully consider whether such a retrofit requirement for engines really brings the results that we need because we would thus restrict the financial capabilities of the automobile industry to invest in new and modern technologies" (Der Spiegel 36/2017, p20).

What this means is shown both by the Chancellor's statement on the "end of the combustion engine" and the announcements by the car industry at the ongoing International Automobile Exhibition (IAA) in Frankfurt. Volkswagen alone wants to increase the investment in electric cars to 20 billion euro by 2030. More than 80 new variants of autos with electric motors are planned by brands of auto concerns by 2025, including some 50 pure electric models and 30 plug-in hybrids, said VW CEO Matthias Müller in the run-up to the IAA. As we said: well-versed chess game and great drama! But does the environment really improve in the long term and what does the whole story tell us about the political regulation of the auto sector? But even electromobility is only less damaging for the environment, if the energy turnaround is carried out more thoroughly and the batteries are further developed (Source: Deutschlandfunk, 31. Juli 2017).

A pillar of the German economy - effectively regulated in the EU and Germany?

It is no coincidence that the German automobile concerns are in the pillory of the US authorities and the US judiciary, which have clearly defined the borders again breach of rules. In Europe and Germany, on the other hand, very unclear, malleable applications regulations and the controls remained rather superficial. So the EU in Article 5, Clause 2 of its Emission-Basis-Directives of 2007 exceptionally permits defeat device, when "... the device is necessary to protect the engine from damage or accident and to ensure the safe operation of the vehicle" (Article 5, Paragraph 2, Clause 2, Lit. a EBV). The Federal Ministry of the Interior, therefore, states in its report of the investigation commission that although all manufacturers use such defeat devices, no inadmissible defeat devices are used (report of the investigation commission of the BMVI 2016: 119). Depending on the interpretation, the defeat devices appear here as legal at one time and irregular at another. In this way, the institutional environment in Europe and the "industry-driven" policy of the Ministry of Transport in Germany promoted the auto sector’s susceptibility to deviance in terms of environmental degradation, which is accepted with approval. The situation in the US is diametrically opposite to the situation in Europe. Here, the Volkswagen Group did not get away as cheaply as it did a few decades before, because the penalties, restitutions and legal costs now add up to 22.6 billion US dollars. But this is still far from over. A further lawsuit filed by the State of Wyoming for violations of environmental laws was dismissed by the presiding judge, Charles Breyer, in San Francisco on the ground that the alleged violations of the Clean Air Act were a federal affair of the US Environmental Protection Office. This is probably why VW is also "all-clear" in the complaints of Illinois, Minnesota and Ohio. At the end of March, VW had reached settlements with other states. But with Alabama, Missouri, Montana, New Hampshire, Texas and Tennessee there are complaints from six other American states, which are to be heard by other courts. And here the outcome seems rather uncertain (Source: ZEIT ONLINE, 1. September 2017).

The differences in law enforcement and its consequences for the environment

What is the difference in the public handling of with the defeat devices in Europe and the USA? There are certainly many aspects that can be cited here, from the different legal systems to the political interests that are behind them. I would like to emphasize only one aspect of this complex mixture: there is a link between defective regulations of a branch and the taken-for-grantedness of the deviations from rules in companies. Institutions and regulations are defective when there exists laws and directives, f.e. like the exhaust gas standards, but these either fail to set sufficient standards or their administrative enforcement is patchy or inadequately guaranteed. In this case, the constitutional legal bases are not undermined, but the purpose of the regulation is largely missed. The protection of the environment is only "nice to have", which we have repeatedly witnessed in the past months. Such a defective regulation creates, in my view, important preconditions for the emergence of forms of deviant self-regulation at the level of enterprises. And that is exactly what happened in the case of the Dieselgate disaster. Defective institutions are, in this sense, functional for the maintenance of a system which systematically and legally subverts the purposes of statutory regulation.

Lawrence Lessig called this phenomenon "institutional corruption". While the USA is rapidly enforcing its stricter laws in this case, environmental protection in Germany and Europe falls by the wayside in this case. As a consequence, according to a report in the news magazine Der Spiegel, the off-road vehicles that had been taken off from the market by Porsche in the USA reappeared in Germany - of course, slightly retrofitted and equipped with a software update. Other countries, other ways to pollute the environment. For the software update prescribed by the Chancellor basically does not solve the problem of excessive Nox and fine particulates emissions. It is primarily a formal regulation relating to the approval of the vehicles, which still fails to regulate the environmental protection in this sector effectively. Unfortunately, this is not uncommon in the case of environmental protection: many studies show that the significance of environmental offences in court proceedings is often reduced in favour of the accused, and the national law enforcement authorities give only a low priority to such crimes.

Kick it like Merkel – that is, once more: right-of-way for the auto industry, and we, the drivers, will presumably sanction it frequently by buying their low-priced new cars on sale.

For further information about the diesel summit, see the article in The New York Times https://www.nytimes.com/2017/08/02/business/energy-environment/germany-diesel-car-emissions.html?mcubz=0

 

Sources

Europäische Union 2007: Article 5, Clause 2 of its Emission-Basis-Directives [http://eur-lex.europa.eu/legal-content/de/TXT/?uri=CELEX%3A32007R0715]

Bericht der Untersuchungskommission „Volkswagen“ des BMVI 2016 [https://www.bmvi.de/SharedDocs/DE/Anlage/VerkehrUndMobilitaet/Strasse/bericht-untersuchungskommission-volkswagen.pdf?__blob=publicationFile]

Deutschlandfunk, 31. Juli 2017 “Elektroautos. Gut für die Stadtluft, schlecht für die Umwelt? abrufbar unter: [http://www.deutschlandfunk.de/elektroautos-gut-fuer-die-stadtluft-schlecht-fuer-die-umwelt.697.de.html?dram:article_id=392370]

ZEIT ONLINE, 01. September 2017 „US-Richter weist Klage gegen VW ab” [http://www.zeit.de/wirtschaft/2017-09/usa-volkswagen-diesel-rechtsstreit-wyoming]

By Elizangela Valarini

The fact that the Brazilian judiciary has been much more efficient in the investigation and execution of corruption cases in recent years is beyond question. Not only have several institutional changes launched over the last decades played a part, but also the Brazilians‘ changed perception and acceptance of corruption. However, many politicians in Brazil still seem to believe that in the end it remains business-as-usual. How many more accusations still have to be made to wake them up? The conviction of former President Luiz Inacio Lula da Silva in first instance, the indictment against President Michel Temer, the investigations on 8 ministers, 24 senators, 39 members of the Chamber of Deputies and 3 governors, as well as the convictions and arrests of dozens of other politicians and top managers do not seem to be enough to stop the hidden political corruption.

The corrupt political environment in Brazil is neither associated with a certain party, nor has the corruption particular family or social backgrounds. Politicians and members of the government who were investigated and arrested belong to different political parties and they also come from different interest groups, which in turn have different political goals and social conceptions. However, all seem to use the same practices when it comes to maintaining their political position and the primacy of their party. As soon as a good relationship and a possible "money source" appears on the horizon, they would grab any possibility to bankroll their campaign, their party as well as to line their own pockets.

Who is driving the system? Who has started it?

But politicians and their parties alone cannot maintain this politically deviant environment in Brazil. Big business also plays an important role here. However, it is difficult to say who is driving the system or who has started it. Is it the political system that fails to show the company any way to be economically successful without corruption? Or are companies exploiting the weakness of the political system in order to benefit themselves? In any case, it is the big companies that keep this system of corruption running. They not only have the necessary capital to fund the parties and politicians, they are also the ones who have the capacity to commit bribery and corruption schemes through government contracts. They are not only the means, but also the way to achieve the goal. As the quid pro quo, they received preferential treatment both in winning fat contracts and benefitting from legislative amendments for their enterprises.

The investigation of Operation Carwash makes it clear that the arrests of and harsh penalties for companies and politicians have not prevented them from continuing their corrupt practices. Once new detection measures are adopted, new strategies for fraud, bribery and money laundering are devised. Even witness murder is openly discussed. Sooner or later, however, most of them land in an investigation. This is exactly the case of Michel Temer, the president of the country, who was vehemently committed to impeaching the former President Dilma Rousseff. He is charged with corruption, money laundering and the formation of a criminal organization. His "money source" J&F, which is currently being investigated in several corruption scandals, has reached an agreement with the public prosecution authority and has testified against almost all of his accomplices.

Institutional changes on the political level are just as important

Joesley Batista, the now resigned president of the J&F, presented the public prosecution authority with four pieces of what he claimed to be taped conservations with high-ranking politicians, including a conversation with President Temer. The recorded conversation clearly indicates that J&F was trying to prevent, with Temer's support, further investigations by the judiciary. To prevent Eduardo Cunha, the former President of the Chamber of Deputies, who has been arrested since October 2016, from testifying before the court, Joesley Batista takes care of the well-being and financial affairs of the Cunhas family. Batista also ensured that the testimonies from those who are currently in custody remained in tune with each other. The content of the conversation between Batista and President Temer did not stop at the obstruction of justice, but showed clearly that the bribery system remains valid despite all the excitement and attention of the media, authorities and the general populace. In this sense, the fear of being uncovered seemed to have been much lower than to leave the driving corrupt forces of the old, deeply entrenched patterns. The transformation of a political system characterized by corruption, such as Brazil‘s, takes some time to consolidate the effect of institutional change in its structure. Even though major legislative changes and institutional changes have been completed over the last decades, which have made an important contribution to improving transparency in government administration and strengthening press freedom and justice, this could not (yet) prevent the systemic corruption. However, all these changes have contributed to the fact that the previous corruption scandals are now accessible to all in the press and on the official websites. It is not enough to stop systemic corruption. But it is a first and important step in a long-term process. Further institutional changes on the political level are just as important.

 

Sources

Petition N. 7003
Inquiry N. 4483/STF (Supreme Court)
Inquiry N. 4489/STF (Supreme Court)

By Markus Pohlmann

Now the time has come. On 28 June 2017, the Federal Court of Justice decided to throw out the public prosecution‘s appeal against the Göttingen verdict: it is now legally binding. All related court proceedings in Leipzig, Göttingen and Munich have been waiting to see whether the initial verdict in Göttingen, which ended up with an acquittal for Aiman O., would be revised. This has not come to pass. It is a good occasion to look back at the background of the scandal.

What exactly happened at Munich, Leipzig, Göttingen, Heidelberg and other university hospitals? In 2012, the supervisory board of the German Medical Association (Bundesärztekammer, BAK) received an anonymous tip about irregularities in the liver transplantation section of Göttingen University Hospital. The BAK started an investigation and discovered various violations of the BAK’s directives concerning the priority of patients on the waiting list for an organ transplantation. The number of violations was surprisingly huge. Most of these consisted in, among others, false statements of medical facts and medical data, which served to determine the ranking position on the waiting list of Eurotransplant, the agency responsible for the allocation of organs. The cheating helped its own patients to move up the waiting list at the expense of others. The BAK informed the press, which flashed up the affair by relating it to organ trafficking and illegal personal enrichment of vicious surgeons. Again, it was the basic idea of a few rotten apples among a basketful of fresh ones. Public prosecution stepped in and the indictment shocked all other surgeons: attempted manslaughter. According to the allegations, the defendant should have known about the lethal consequences of his act for the displaced patients.

Not just a few Rotten Apples – A System in the Dock

But in fact, the story is not about a few rotten apples. The whole system, which is based on a choice between Scylla and Charybdis, is put in the dock. No matter what directives are issued, the scarcity of organs makes it inevitable that some patients will die due to these rules. This is exactly what is happening. In sociology we call this situation Tragic Choices (Guido Calabresi and Philip Bobbitt, 1978). If you put the survival rate first, patients in urgent conditions will die; if you put patients in urgent conditions first, patients with a slightly better survival rate will die while waiting for an organ. In whichever way one acts, he acts in the wrong way. That’s why politicians are trying not to get their fingers burnt and delegate the responsibility to the German Medical Association, which finds itself in a difficult situation with regard to its own directives on organ donation, for it too knows no means of overriding the Tragic Choices.

But let’s get back to the rotten apples. We can refute today that it was a question of individual deeds and individual perpetrators, but far too many directive violations have been listed. While there were no complaints about kidney and pancreas transplantations, those about liver, heart and lung transplantations accounted for 19 percent, 15 percent and 14 percent of the inspected cases, respectively. Of the 2,120 examined transplantations, 354 were manipulated according to the BAK’s Investigative Commission. This is very significant when one compares it with the occurrence, for example, of fraud and counterfeiting in Germany. Here there are 3.4 cases per 100,000 inhabitants. Of course, according to the Commission's reports, not all, but rather 12 out of 52 transplantation centres were involved. Of these 12, Göttingen was at the top with directive violations in 75 percent of the examined cases, followed by Jena with 63 percent and Heidelberg with 56 percent. On average, directive violations were listed in 38 percent of cases at the 12 centres. As always, it turns out that we are not dealing with individual deeds, but with policy violations by the entire system.

What lies behind the System Breaches?

But what was behind it? The doctors’ greed for personal enrichment was certainly not. This is much too simple. The accusation of attempted manslaughter already drew attention to the fact that there was no sufficient evidence for greed motives of the surgeons. Otherwise they would have attempted murder. We can show that the surgeons in this field, first of all, are very much oriented towards the benefit of the clinics and their own reputation. Everyone knew in this field how many organs each other transplanted. And some had been extrapolated to transplant more organs. The fate of the patients played no role at all. Secondly, the dilemmatic situation seems to us an important reason for the evisceration of the BAK rules. It is crystal clear in the case of liver transplantation. Here the surgeons were not allowed to perform the transplantation until the established medical indicator system made sure that the severely ill patients were truly severely ill, and the transplantation often only served to delay death. They had to keep their figures off the sick patients with better healing chances. Confronted with the day-to-day suffering they witnessed, this might have caused some to help with false statements of medical data. Thirdly, the field of transplantation medicine has only been regulated lately and many of the surgeons are used to a higher degree of freedom in their decisions. Since the individual case is always complex and difficult to comprehend with rules, it is obvious that some medical practitioners took over control themselves and, apart from the rules, relied on their medical professionalism. This does not apologize for such misconduct, but tells us a lot about its background.

But why is the accused surgeon in Göttingen now legally absolved? In the majority of cases, the manipulations could be demonstrated, but they could not be attributed to him. In other cases, there was no presumption of a criminal offense, since, among other things, the BAK directives were regarded as unconstitutional. So Aiman O. is now finally out of prison, while the same statement of the Federal Court of Justice has given the system of transplantation medicine a serious warning.

 

Sources

Pohlmann, Markus und Höly, Kristina (2017): Manipulationen in der Transplantationsmedizin – Ein Fall von organisationaler Devianz?, in: Kölner Zeitschrift für Soziologie und Sozialpsychologie, Heft 2: 1-27, link.springer.com

Presse Release / Pressemitteilung des Bundesgerichtshofs Nr. 98/2017 vom 28.06.2017

Save the Date: 5 - 7 October 2017, International Symposium on “Bribery, Fraud, Cheating – How to Explain and to Avoid Organizational Wrongdoing” at Herrenhausen Palace in Hannover

By Markus Pohlmann

How is the Mafia actually doing in Germany? The answer has been the same for many years: it is prospering. According to the Federal Criminal Police Office (BKA), more than 500 members of the Italian mafia are currently active. According to the BKA, Germany is mainly used by the Italian mafia in such areas as drug crime, counterfeit crime, money laundering and corporate crime, but also serves as a retreat and investment area.

Germany - A Paradise for Mafiosi?

And why is the Italian Mafia doing so well in Germany? On the one hand, although it is called organized crime, the mafia itself is not an organization. The membership rules are different. One cannot apply for a position. Acceding to the mafia is nothing more than a ritual but there is no exit option, except a mortal one or an escape into a witness protection program. The Mafiosi must be available at any moment and have to vow unconditional obedience. Vendetta and violence are important ingredients of the association, which bribe, threaten and even murder anyone who tries to resist racketeering. Thus, policemen, prosecutors, judges as members of modern organizations have difficulties to fight against the archaic associations of the mafia. After all, who is willing to risk their lives and the lives of their families for a thankless job with an ordinary salary? (see Pohlmann 2016: 23-31). On the other hand, not only are high legal barriers to prosecution important reasons for Mafia’s success, but also the great difficulties to identify the Mafia, who is operating in legal fields in an increasingly more professional manner. According to Italy's renowned Mafia-hunter Roberto Scarpinato, members of the new generation of criminals of the Italian Mafia now also include lawyers, financial advisers and bankers. They feed the clans‘ money into the legal money cycle. And once you have one of the mafiosi in the dock, the star laywers are not far from bailing him out again. The journalist and writer Petra Reski already reported in 2010 in her eye-catching book "From Kamen to Corleone" on the dubious activities of the "honorable society" in Germany. The mafia membership itself is not a criminal offense in Germany, unlike in Italy. In Germany, the law enforcement agencies have to prove, with great effort, that a mafioso has acquired his millions illegally; otherwise he may resume his criminal luxury life, after serving his often short sentence. It is the other way round in Italy and the USA. The suspect’s fortune will be seized if he cannot prove how he got it. As early as 2013, the German Federal Government had announced the reversal of the burden of proof. But as long as the reform fails, suspected mafia members are still doing well. But the journalists, such as Petra Reski, who report on them, are not. Again and again they have to face litigations.

Some Highlights of the Conference

If you would like to get to know Roberto Scarpinato and Petra Reski, you can grab the chance during our conference from 5 to 7 October 2017 at Herrenhausen Palace in Hanover. We cordially invite you to this symposium at Herrenhausen Palace, to be attended by an internationally high-profile cast and is dedicated to the subject of “Bribery, Fraud, Cheating – How to Explain and to Avoid Organizational Wrongdoing“. The Volkswagen Foundation is holding this conference together with the Max Weber Institute for Sociology, headed by Prof. Dr. Markus Pohlmann and Prof. Dr. Gerhard Dannecker (Institute for German, European and International Criminal Law and Criminal Procedure Law), Prof. Dr. Dieter Dölling and Prof. Dr. Dieter Hermann (both from Institute of Criminology) in Hanover. The symposium is a contribution to the explanation of the recent "corruption and manipulation epidemic", as well as to shedding light on the possibilities of avoiding such cases in the future.

The first session, on 5 October, serves to distinguished organized crime from corporate crime. Other sessions deal with the political turmoil in Brazil and China, triggered by the new phase of the combat against corruption. Top lawyers, prominent prosecutors and judges report their fight against corruption. With Volkswagen, Siemens and Deutsche Bank, Germany, Europe and the USA are also making scandalous contributions to the theme of the symposium. The emissions scandal, the Libor scandal and other cases of corruption and manipulation will be discussed on Friday, 6 October. Top attorneys, former top managers and academics, will be probing cases and discussing ways to prevent similar occurrences in the future.

But it is not only in the economy that corruption goes viral. Sport is also an El Dorado for criminal associations and crime in or by sports organizations. From an inside view of the prosecution in the FIFA corruption affair to the problems of combating money laundry in football and through sports betting, current scandals and their prosecution are discussed. On Saturday, 7 October, the symposium will deal with the manipulations in transplantation medicine and the prevention of corruption in medicine. Finally, leading experts from academia, journalism, NGOs and the judiciary will discuss new ways of preventing crime in or from companies, hospitals, sports associations, etc., which also take into account the dark side of compliance and companies‘ internal investigations.

Programme, registration

Have we piqued your interest? Then you will find here the preliminary programme as well as the access to the registration. The international symposium takes place at Herrenhausen Palace (in Hannover), one of Europe's most prestigious venues. The catering will be provided by the Volkswagen Foundation. As the number of seats is limited, we ask for your early registration.

Travel Grants for Junior Scientists and Post-Docs

For 15 junior scientists and post-docs, travel expenses allowances are available. For them, there is also an additional programme with science slams and poster sessions. In case a sponsorship is granted, the travel costs, and, if applicable, visa and hotel costs will be borne by the Volkswagen Foundation. Those who are interested can apply directly to the Volkswagen Foundation by 15 July 2017. Please find out more about the Infosheet for Travel Grants.

Contact

We are looking forward to your participation and would be happy to answer your questions by e-mail (herrenhausen.symposium@uni-heidelberg.de) or by telephone (++ 49 (0) 6221 54 22 26).

By Markus Pohlmann and Jaok Kwon-Hein

On 10 March 2017, the Constitutional Court of Korea upheld a parliamentary vote to impeach President Park Geun-hye over a corruption and cronyism scandal. The first female president in South Korean history as well as the first daughter of the former dictator Park Chung-hee (1962-1979) has become the first democratically elected Korean president to be forced from office. Park Geun-hye won great victories at the presidential election in 2012 strongly supported by the lingering nostalgia for her father who successfully achieved the unprecedented economic development in the 1960s and 1970s. In addition, the accumulative images created by her role as the de facto first lady after the assassination of her beloved mother in 1974 as well as a child who had to tragically experience a bloodshed of her father by the Korean CIA in 1979 contributed to the victory of her presidential campaign.

Lurking in the background of the corruption scandal is Choi Soon-sil, a confidante of Park Geun-hye, who has been accused of fraud, coercion and abuse of power using the connection to Park in extorting large sums from Chaebol in the name of donation through two non-profit organizations which she set up. Park Geun-hye was accused of soliciting bribes from Chaebol in order to support the illegal behaviour of her friend. In particular, Samsung, the country’s largest conglomerate, was deeply embroiled in the bribery scandal by donating millions. To respond in kind, the government backed a merger of two Samsung affiliates in 2015. It was considered as a vital procedure to support the succession of the control over “Samsung Empire” Since the Samsung group Chairman Lee Kun-hee was delivered to the medical Centre because of heart attack in 2014, Samsung was under pressure that they should hand over the crown to his only son, Lee Jae-yong.

Corruption Drama à la Shakespeare

The underlying constellation resembles one of Shakespeare's royal dramas. The mother of Park Geun-hye fell victim to an assassination that actually targeting her husband, Park Chung-hee. The founder of a dubious pseudo-Christian sect (the Church of Eternal Life) took the opportunity of the mother’s early death – much to the father’s displeasure - to influence her daughter. When the father of the future South Korean President was murdered, the daughter of the illustrious sect founder, Choi Soon-sil, also joined the orphan’s company. However, the two were presumably already in contact with each other even before the murder. When this orphan became South Korea’s first female president many years later, Choi Soon-sil might have not only maintained a spiritual influence on her but at the same time cashed out in a roundabout way, so the accusation goes, many millions in bribes. In the meantime, the daughter of Choi Soon-sil, who is also behind bars, continued her career as a dressage competitor, among other things, in Germany, funded by foundations that were also capitalized by Samsung. The whole drama has not only took the very active civil society movements in South Korea to the street, led to a vote of mistrust and the resignation of the president, but also to the arrest of all parties involved as well as to early elections, which will take place on May 9, 2017.

A Culture of Give and Take

South Korea is a relatively young democracy with a significant culture of giving and taking, personal trust and a strongly defining socialization in school classes and educational institutions. Families and regional affiliation are still important pillars of South Korean self-understanding. However, many cultural rules of giving and taking are today subject to modern corporate and regulatory compliance rules as well as strict anti-corruption laws. South Korea is also vigorous in combating corruption. The only thing one can see is that all the presidents – with the exception of Park Chung-hee (1962-1979), who was assassinated in 1979 – were under investigation for corruption and fraud during or after their terms of office. Before the current charges against Park Geun-hye, the former military dictator Chun Doo-hwan (1980-1988) and the first democratically elected President Roh Tae-woo (1988-1993) were sentenced to long prison terms, even though they were later granted amnesty. Also imprisoned for corruption were the sons of President Kim Young-sam (1993-1998) and President Kim Dae-jung (1998-2003). And President Roh Moo-hyun (2003-2008) took his own life during corruption investigations against his wife, his son and his brother. Likewise, the presidents of South Korea’s big corporate groups often end up in jail as a result of bribery and fraud, even if they are pardoned shortly afterwards. President Lee Myung-bak for example, who was in office from February 2008 to February 2013 and whose brother also received a two-year imprisonment for corruption, granted amnesty to 55 businessmen who were for the most part convicted of corruption (See the study by Thomas Kalinowski 2016).

This leads to a typically South Korean dynamic among persistent bribery and fraud, efficient prosecution and severe condemnation thereof, as well as the regular pardon of the economic and political elites. The background music is provided by the active civil society movements as well as the social media, which repeatedly disavow the economic and political elites without being able to fundamentally change the system behind it. The dramaturgy at the theater of corruption in South Korea and the underlying system have not changed fundamentally for years.

The Many Facets of the Drama

What is the cause for this? We would like to highlight three key factors among the many explanatory factors. First of all, South Korea is known for its closed elite system. On the one hand, the clan structures of the big business conglomerates play a major role. On the other hand, the key element here is the elite universities. 72 percent of the top 100 CEOs of South Korean leading industrial companies in 2015 have a degree from the top 5 universities (See also the study by Pohlmann / Lim 2014). Most government ministers over the past 20 years have also graduated from these universities. Very often, they share the same social background of the upper class. Despite the fact that entrance exams are accessible to everyone, access to the elite universities is socially highly selective. The reason is that performances in the entrance examinations very much depend on whether you have attended the right (sometimes very expensive) schools, have invested enough money in tutoring and remunerated teachers for additional care. These universities, such as the Seoul National University, are therefore an important recruitment base for the economic and political elites and create important social interdependencies that are later on perpetuated through everyday giving and taking. Secondly, these networks culminated in Seoul, a metropolis of 14 million people, where more than a quarter of South Korea’s entire population lives. Who wants to become part of the South Korean power elite, has to move there. Although Seoul is a big city, the centres of power are easy to grasp. Here the social circles of the economic and political elites are constantly and inevitably overlapping. Thirdly, the political system, with frequent political changes, weak parties and increasing election costs that the candidates usually have to finance themselves, is also responsible. This has increased the susceptibility to corruption, illegal campaign finance and the influence of companies and business people (See also Croissant 2013).

Business as Usual in South Korea?

Thus, did nothing really change in South Korea? We do not think we can end up with it. The close relationship in political, military and partly economic terms with the USA has left its mark. This applies not only to the more liberal orientation of the state and the reduction of all-too-close links between economy and politics, but also to the imitation of effective strategies in the fight against corruption. And the increasing protests of the younger people show at least that this struggle now has even more support. Perhaps this can help lay the ground for the numerous impulses for change in the economic and political system, despite the closeness of the elite system, the clan structures of big corporate groups and the weaknesses of the party system.

 

Sources

https://www.theguardian.com/news/2017/mar/10/park-geun-hye-impeachment-what-next-for-south-korea

http://www.koreaobserver.com/lee-kun-hee-dead-alive-health-of-samsung-chairman-lee-kun-hee-27791/

https://www.nytimes.com/2016/11/01/world/asia/south-korea-park-geun-hye-choi-soon-sil.html?_r=0

Croissant, Aurel (2013): Das politische System Südkoreas. In: Derichs, Claudia und Heberer, Thomas (Hrsg.): Die politischen Systeme Ostasiens. Wiesbaden: Springer VS, S. 355-429.

Thomas Kalinowski (2016): Trends and mechanisms of corruption in South Korea, in: The Pacific Review, 29:4, 625-645

Markus Pohlmann, Lim, Hyun-Chin (2014): A New „Spirit“ of Capitalism? – Globalization and its Impact on the Diffusion of Neoliberal Management Thinking in Germany and the East Asian Economies, in: Development and Society, Vol. 43, No. 1, p. 1-32