ANTICORRUPTION EFFORTS AND ACHIEVEMENTS IN

UNCLAS SECTION 01 OF 06 TEGUCIGALPA 001927

SIPDIS

STATE FOR INL/C DAVID LUNA AND JOHN BRANDOLINO, FOR AID
EXO/WHA JOHN SMITH AND FOR WHA/CEN

E.O. 12958: N/A
TAGS: KJUS KCRM KSEP PGOV EAID HO
SUBJECT: ANTICORRUPTION EFFORTS AND ACHIEVEMENTS IN
HONDURAS

REFS: (A) 02 STATE 90733
(B) TEGUCIGALPA 01811


1. This cable responds to the action requested in
Reftel.


2. SUMMARY: Over the course of the last three years,
there has been considerable activity in the battle
against corruption in Honduras, in which the government
of Honduras (GOH),civil society and the private sector
have been involved. Anticorruption efforts are a Mission
Program Plan priority for Post, and they are an important
cornerstone of U.S. diplomatic undertakings in Honduras.
As a result of these efforts, public awareness has been
heightened and the GOH has taken steps to both identify
and address the problem of corruption. While the fight
against corruption rages on, there are concrete successes
attributable to USG technical assistance and bilateral
diplomatic efforts. We provide here brief descriptions
of the various anticorruption projects and activities,
along with summary assessments of their achievements.


3. Many of the anticorruption efforts described herein
are components of various Hurricane Mitch assistance
programs funded by the May 1999 supplemental--the
projects are drawing to a close. Without the additional
funds, Post will be hard-pressed to continue work in
furtherance of its anticorruption goals. END SUMMARY.

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EFFORTS FUNDED BY INL HURRICANE MITCH FUNDS
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INL SECURITY MINISTRY ANTICORRUPTION PROJECT
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4. The Public Security Ministry (MoPS) project involved
three (3) primary components--training, technical
assistance and the provision of equipment and software.
To accomplish the anticorruption initiative, the project
focused on the investigation of financial crimes, as well
as the development and implementation of a case-tracking
system. Courses were taught in investigative techniques,
report writing and interviewing methods, financial crimes
auditing and various computer skills. Hands-on technical
assistance was provided in the field. Both computer
hardware and software was donated so that investigators
and prosecutors can participate in the National Automated
Case Management and Information System (NACMIS).
Additionally, technical assistance was given to the
Financial Crimes Unit (FCU) to help them develop
specialized modules to support financial crimes in the
NACMIS.


5. As a result of the project, the FCU's ability to
investigate, prosecute and track public corruption and
financial crime cases is considerably greater. Moreover,
the GOH now has the capacity to link this computer system
with the judicial sector system. Project funding was
$150,000 and was managed by ICITAP.

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INL PROCURADOR GENERAL ANTICORRUPTION PROJECT
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6. The Honduran Procurador General performs functions
similar to those performed in the U.S. by the Office of
the Inspector General and the Office of the Solicitor
General. This three-pronged project included the
provision of training, technical assistance and
equipment/software. The project focused on the
investigation of tax-related financial cases, as well as
the development and implementation of a case-tracking
system. The same types of courses as were taught in the
MoPS project were also taught in this project. As in the
MoPS project, the donation of hardware and software made
it possible for the Procurador General's Office to tap
into the NACMIS system. The benefits of the
anticorruption initiative include a heightened ability to
handle cases involving tax evasion and the capacity to
tie into the future judicial computer system. Project
funding was $150,000 and was managed by ICITAP.

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INL PUBLIC MINISTRY/IABF PROJECT
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7. The Inter-American Bar Foundation (IABF) has a
$400,000 grant of INL funds (administered by out USAID
mission)to provide technical assistance and training to
the Public Ministry (MP--Attorney General's Office). The
project focuses on strengthening the capability of the
Public Ministry to detect, investigate and prosecute
public corruption cases (in particular, to prosecute
successfully under the recently implemented oral
accusatory judicial system). The project has three
components--to increase the effectiveness of the MP in
the fight against corruption, to form an inter-
institutional alliance against corruption and to
strengthen the Citizen Advisory Council (CAC) as an
anticorruption tool.


8. First, the project involved the selection of six
active corruption cases for which prosecutors in the MP's
Anticorruption Unit received specialized training in
investigative techniques. Additionally, inter-
institutional committees were formed to coordinate
efforts and avoid duplication of services. Along with
the MP, the Comptroller General's Office, the Directorate
of Administrative Probity and the Honduran IRS
participated. The goal of this training is to teach
prosecutors how to develop a corruption case from the
initial investigation through prosecution and trial. A
broad-based interagency case-study approach is used to
encourage agency cooperation. An inter-institutional
alliance against corruption was formed, and a final
report regarding its formation is forthcoming. The CAC
(intended to make recommendations for the repeal and
modification of various immunities enjoyed by public
officials) has been only marginally successful. The
CAC's progress is at a standstill, so alternative
solutions are being pursued.

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INL DIRECTORATE OF ADMINISTRATIVE PROBITY PROJECT
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9. The Public Affairs Section (PAS) carried out a two-
year $150,000 anticorruption project in conjunction with
the Directorate of Administrative Probity (DPA). The DPA
serves as the GOH's chief ethics watchdog and performs
some functions that are similar to those performed by the
Office of Government Ethics. Approximately $86,000 was
spent on technology, including a digital copier,
computers, printers, Oracle database software, licenses
and technical support and training for DPA staff.


10. The remainder of the funding was spent on training
seminars and conferences, both in Honduras and the U.S.
The training and conferences focused on financial
government administration, anticorruption in government
and the private sector, and government ethics. PAS
hosted five (5) workshops with presenters recruited by
State's International Information Programs (IIP) Office
of Speakers and Specialists. The speakers' areas of
expertise included government ethics, anticorruption and
financial oversight.

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INL MIGRATION COMPUTER PROJECT
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11. This $217,000 project, currently in the contracting
phase, is designed to provide computers, modems and other
hardware to the GOH Office of Migration. The equipment
will augment the GOH's ability to transmit migration
information between offices efficiently, and generally
enhance the record-keeping capabilities of the Migration
Office. Moreover, the project to issue Machine Readable
Passports in Honduras (funded through the 2001 INL Letter
of Agreement) will dovetail with the Migration Office's
new hardware, making migration and border controls in
Honduras better than ever. Post anticipates that both
projects will be in place before the end of FY 2002.

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USAID COMPTROLLER GENERAL PROJECT
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12. One of the objectives of USAID's Transparency
Program is to strengthen the capability of the
Comptroller General of the Republic (CGR) and promote
enhanced awareness of the importance of audits in
general. Several goals have been accomplished,
including:

-USAID's contractor conducted training (most notably to
the Audit Unit for Projects of International
Organizations),while overseeing systematic concurrent
audits of Hurricane Mitch reconstruction projects.
-The Regional Inspector General certified the CGR to
perform audits for U.S.-funded programs.

-A Web site for the CGR was designed
(http://www.cgrh.net/) and assistance was given in the
publication of final audit reports on the site.

-A much-needed Audit Recommendation Follow-Up System was
developed in order to promote early and impartial
resolution of recommendations.

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ASSISTANCE TO THE NATIONAL ANTICORRUPTION COUNCIL
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13. USAID's Transparency Program provides support to the
National Anticorruption Council (NAC),which was created
by former President Carlos Flores, reinforced by
President Maduro and is chaired by Roman Catholic
Cardinal Oscar Andres Rodriguez. The objective of the
NAC is to develop and implement a national anticorruption
strategy and action plan. USAID provided financial
support for civil society events, and financed a public
opinion survey about corruption, governmental integrity
and accountability issues. Results were publicly
presented and used as a basis for the NAC's National
Anticorruption Strategy. USAID serves the NAC in an
advisory role, with emphasis on diagnosing the
anticorruption problem in Honduras.


14. U.S. funds for the project total $291,665 and are
managed by the United Nations Development Program (UNDP).
Recently, USAID delivered a letter to the Cardinal
reaffirming its support for NAC's activities. Other
international donors also support the NAC, including
Canada, the United Kingdom, Sweden, the Interamerican
Development Bank (IDB),the UNDP and the World Bank.

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USAID MUNICIPAL DEVELOPMENT PROGRAM
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15. USAID supports accountability and transparency at
the local level through its Municipal Development Program
(MDP). The MDP installs formal internal controls on
municipal accounting/management systems, trains the
community to oversee the performance of local governments
and their use of resources, involves citizens in decision
making processes and in oversight functions, and
strengthens management systems at the local level.


16. Using Hurricane Mitch reconstruction funds, Post
signed a Cooperative Agreement (CA) with the Municipal
Development Foundation (FUNDEMUN),under which FUNDEMUN
designs and implements a strategy for social auditing to
follow-up processes and activities for reconstruction
projects.

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TRANSPARENCY AND GOVERNANCE WORKING GROUP
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17. The GOH, civil society and, subsequently, the
Consultative Group for the Reconstruction and
Transformation of Honduras (whose members include the
leading members of the G-15),established a Transparency
and Good Governance Working Group to address issues of
government accountability, transparency and corruption.
Its priorities include immunities laws, social auditing
and the NAC.

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USAID/GOH/IDB PROCUREMENT INSPECTION PROJECT
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18. USAID joined with other donors to establish an $11.5
million independent donor mechanism, which provides
management oversight to the operations of the GOH's line
ministries and independent GOH agencies in their
implementation of Hurricane Mitch reconstruction
programs. This effort is part of a larger IDB program to
strengthen the Honduran procurement system.
Specifically, there will be selective inspections of the
procurement and contracting processes, covering
technical, administrative, financial and control aspects.

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OTHER USAID PROJECTS
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INTER-AMERICAN CONVENTION AGAINST CORRUPTION
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19. Through its Transparency Program, USAID intends to
promote monitoring of the standards set forth in the OAS
Inter-American Convention against Corruption (IACAC). In
particular, USAID will encourage the assessment of the
Honduran legal framework against the IACAC standards.

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CIVIL SOCIETY/PUBLIC AWARENESS CAMPAIGN
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20. USAID's work with government control entities is
enhanced by effective public information campaigns, which
increase citizen awareness of the importance of vigilance
over the GOH's administration of public resources,
knowledge about what kinds of problems to look for, and
clear instructions regarding what to do if corruption is
identified. Moreover, one of the objectives of USAID's
Transparency Program is to develop a public awareness
campaign strategy. USAID published a booklet featuring
the IACAC illustrated with cartoons that relate to the
Honduran experience. The booklet will soon be available
for distribution.


21. USAID and the Center for the Investigation and
Promotion of Human Rights (CIPRODEH) created a
transparency Web site (www.e-demoKratia.org),printed
bulletins called "Transluz," and presented workshops on
transparency in the budget process. In 2001, the
Ministry of Defense published its budget for the first
time. In 2002, the GOH published the budget broken down
by Ministry in a groundbreaking effort to achieve better
transparency. Taken together, USAID transparency efforts
since May of 2000 have totaled $8,294,000.

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MISCELLANEOUS EFFORTS AND STRIDES
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A NEW MONEY LAUNDERING LAW
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22. In February of 2002, the Congress passed new money
laundering legislation, which took effect on June 4,

2002. The law expands the criminal definition of money
laundering to encompass any non-economically justified
sale or movement of assets, and strengthens the powers of
prosecutors to investigate and prosecute suspected
offenses. Additionally, the new law makes the financing
of terrorism a criminal offense and provides for the
creation of a financial information unit to track
suspicious transactions.


23. Officials at the Attorney General's Office and the
National Banking Commission are drafting regulations
applicable to the new financial information unit. In
April, the U.S. Department of Treasury sent a money
laundering expert to Honduras to conduct a needs
assessment for a USG-funded technical assistance package.
According to the Treasury expert, funding for this
project will cost about $250,000 over two (2) years.

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STOCKHOLM DECLARATION OF 1999
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24. The Stockholm Declaration of 1999 as authored by the
Mitch donors, includes as a goal: "Reconstruct and
transform Central America on the basis of an approach
integrated with Transparency and Governance." The
Honduran Follow-Up Group on the Stockholm Principles (G-
15) was formed by the U.S., Germany, Canada, Spain,
Japan, the Netherlands, the U.K., Sweden, Italy, the IDB,
the IBRD, International Monetary Fund (IMF),UNDP, the
Central American Bank for Economic Integration (CABEI)
and the E.U. G-15 members coordinate various efforts and
programs, and the GOH encourages donor coordination.

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GOH POVERTY REDUCTION STRATEGY PROGRAM
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25. Transparency and accountability are becoming much
more high-profile issues in Honduras. As a result, both
transparency and accountability are included in the GOH's
fifteen-year Poverty Reduction Strategy Program (PRSP),
which contains guidelines to transform the country over
the next fifteen (15) years. Notably, since Hurricane
Mitch, the GOH and civil society have taken important
steps to develop the PRSP in a participatory manner.

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A NEW GOH PROCUREMENT LAW
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26. In September 2001, a new government procurement law
went into effect. This new legislation in intended to
increase transparency and reduce corruption.

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A FORTHCOMING GOH CODE OF ETHICS?
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27. The GOH is in the process of developing a code of
ethics for public employees. Post hopes that, in fact,
an effective code of ethics will be implemented--
including rules regarding conflicts of interest and
feasible processes for the investigation and prosecution
of such cases.

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OTHER PRIVATE SECTOR EFFORTS
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28. There are several private sector efforts worth
mentioning:

-The Honduran Council for Private Enterprise (COHEP)
sends a representative to the meetings of the NAC.

-The private sector led the NAC's investigation on the
causes of corruption and its prevention.

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MISCELLANEOUS PUBLIC DIPLOMACY EFFORTS
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29. Septel (Tegucigalpa 01876) reported Ambassador Frank
Almaguer's June 21 speech given to the International
Development and Ethics Association (IDEA) in which he
outlined the U.S. anticorruption policies. The speech
dominated the news in Honduras for days, and clearly has
had a significant impact. This is the most recent of a
number of public diplomacy efforts that serve the
anticorruption effort.


30. There was an interactive dialogue on WHANET that
dealt with anticorruption and money laundering, in which
representatives from the MP participated.


31. Post arranged for an individual from the DPA to
participate in the International Visitor Program on
anticorruption in the government and private sector.


32. With the support of PAS, the Ambassador has become a
champion of Honduran anticorruption efforts. This is the
result of a multitude of public diplomacy efforts,
including:

-Post regularly distributes USG policy statements on
anticorruption to the Honduran press--for example, A/S
Reich's speech on Latin American policy and
anticorruption efforts.

-The Ambassador frequently publicly addresses various
anticorruption issues (e.g. money laundering, judicial
reform, transparency in governance) by way of speeches at
various events, press releases, radio and television
interviews and other media. As a result, anticorruption
has become a popular topic for public debate and public
awareness has been significantly heightened.

-Post has worked hard to convey the message that
anticorruption efforts are an important component of the
war on terrorism--that money laundering, arms and
narcotics trafficking and government corruption all
create an environment in which terrorism can thrive.

ALMAGUER