CORRUPTIONISM IN THE CZECH REPUBLIC

C O N F I D E N T I A L SECTION 01 OF 03 PRAGUE 000057

SIPDIS

E.O. 12958: DECL: 01/25/2020
TAGS: PGOV PREL EINV EZ
SUBJECT: CORRUPTIONISM IN THE CZECH REPUBLIC

REF: A. PRAGUE 16

B. PRAGUE 25

C. 09 PRAGUE 657

D. 09 PRAGUE 147

Classified By: Charge d'Affaires Mary Thompson-Jones for reasons 1.4 (b
) and (d).


1. (C) Summary. A recent cartoon caption in a leading Czech
daily captured what most Czech view as the country's biggest
systemic problem: "We have had capitalism, and socialism
too. Now we have corruptionism." To address corruption, the
interim government of PM Jan Fischer has approved a
legislative proposal that includes immunized witnesses,
undercover agents and wiretaps. Politicians are eager to be
seen as proactive on corruption, but the issue is mired in
partisanship and the proposal will probably be diluted as it
moves through parliament. The proposed package is a small
step in the right direction but not enough. Current
anti-corruption laws are rarely enforced; truly fixing the
problem will require strong enforcement and committed
leadership. Unfortunately, neither appears on the immediate
horizon. End Summary.

Background
--------------


2. (SBU) Since the early 1990s, the Czech Republic has
experienced what one academic called a "mind-numbing" number
of corruption scandals. Interior Minister Martin Pecina,
speaking to a group of U.S. business representatives on
January 22, called corruption in the Czech Republic a
"growing" problem that he claimed has become worse in the
past three years. Pecina's comments should be taken with a
grain of salt -- he is affiliated with the center-left
Social Democrats (CSSD),and his comment was clearly aimed
the center-right Civic Democrat (ODS) government of PM Mirek
Topolanek in power from 2006 until March 2009.


3. (C) Most analysts agree that the onset of widespread,
systemic corruption flourished during the grand coalition
government that was formed after the 1998 parliamentary
elections. Under this so-called "opposition agreement," the
two major parties (CSSD and ODS) carved up the ministries,
splitting control over the important ministries (defense,
finance, transportation) that oversee procurement, public
tenders and real estate development. Since then, the major
parties have tightened their grip on these key ministries,
controlling their tenders and contracts. In addition, the
Czech Republic has seen its ranking in Transparency
International's corruption perceptions index fall three times
in the last three years. This put the Czech Republic behind
most Western European countries and all neighboring
countries, except Slovakia. According to TI's Czech Republic
Director David Ondracka, Czech's 2009 ranking highlights the
need for structural reform and the country's lack of an
anti-corruption government strategy.

Anti-Corruption Proposal
--------------


4. (SBU) To address the problem, the interim government of
PM Jan Fischer, which currently enjoys high approval ratings,
has approved an anti-corruption package to submit to
parliament. Minister Pecina identified the key provisions of
the package as: 1) permitting the use of wiretaps in
corruption investigations; 2) giving the government more
power to access financial data from private companies; 3)
allowing undercover police work in corruption cases as more
than "just observers", including allowing undercover officers
to offer suspects supposed bribes; and 4) creation of a
"crown witness" program (i.e., immunity from prosecution for
turning state's witness). The crown witness program has been
a major obstacle to prosecution and is largely illegal under
Czech law, although a new criminal code that took affect
January 1 permits reduced sentences for state's witnesses in
limited situations.


5. (SBU) According to Pecina, the government put forth these
four measures because they were the least controversial of
the measures considered by the government of PM Fischer.
However, both the crown witness and the undercover agent
proposals have proved controversial. Pecina also noted that
the government is discussing a second anti-corruption package
that would make Czech public procurement law more transparent
and would prohibit anonymous shares (i.e. bearer bonds) in
Czech companies. For example, Pecina said the use of bearer
bonds made it impossible to tell who owned companies
currently renting government-owned office space at
sweetheart-deal prices -- in buildings owned by his own
ministry.

Political Opposition to the Proposal

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--------------


6. (SBU) Politicians are eager to be seen as proactive on
corruption. CSSD chair Jiri Paroubek claims he regards
corruption as a "cancer" in society and that his party was
the only one to openly criticize the systemic corruption of
the Topolanek government. Paroubek and CSSD are pushing
Pecina's proposal in parliament.


7. (SBU) However, there is already political opposition to
the proposal. ODS chair (and former PM) Topolanek has
countered that Pecina's proposal is only an example of
pre-election "populism," thus linking the anti-corruption
package clearly to Paroubek, who is often accused of
unabashed populism. Topolanek voiced no objection to the
crown witness program. However, he has said the undercover
agents could lead to entrapment and the expanded use of
wiretapping was a "step backward" -- a clear effort to
associate Pecina's package and CSSD to the excesses of the
former Communist regime. Topolanek said that ODS would
support the legislation through the first reading in
parliament and then propose its own changes to the
anti-corruption package. (Note: Normally there are three
readings in parliament before a bill can be passed and move
on to the Senate. End Note.)


8. (SBU) Similarly, Supreme Court Justice Pavel Samal warned
that the anti-corruption package proposed by Pecina gives the
police powers not related directly to corruption
investigations. He said that if the package passes as is the
ability of the police to restrict human rights and freedom
will be "among the greatest in the world." When he spoke to
U.S. business representatives, Pecina said wanted to show
critics that the measures he is proposing, which he claimed
are similar to U.S. law, did "not decrease the level of
freedom" in the U.S.


9. (C) The International Secretary for the Christian
Democrats (KDU-CSL) told poloff that KDU-CSL would support
the anti-corruption package in parliament. Pavel Severa, a
TOP 09 Deputy Chairman, commented that TOP would support the
package, except for the undercover agents, also citing
entrapment concerns.

Enforcement and Leadership are Critical
--------------


10. (U) David Ondracka of TI called the anti-corruption
package "a tiny miracle," saying it will send the right
signal. But leading political scientist Vladimira Dvorakova
pointed out that "you can pass a lot of laws, but if there's
no outside control or pressure to enforce them, it doesn't
work." The problem, she noted, is clearly accountability.
"We have the right to ask the politicians questions, but if
he or she doesn't answer, that's it. Nothing happens."
Pollster Jan Hartl pointed out to poloffs that Czech voters
habitually do not punish corruption at the polls because, he
claimed, voters are resigned to corruption as an inevitable
part of Czech politics.


11. (SBU) Jo Weaver, board member of the International
Business Forum, which represents British firms, noted that,
"the general feeling is that about 90 percent of the public
tenders in the UK are clean, and 10 percent are not, whereas
here (the Czech Republic) the feeling is that about 99.9
percent are dirty" (Comment: In our view, this is an
exaggeration. End comment).


12. (SBU) The same sentiment was echoed on January 19 at an
AmCham roundtable on proposed public procurement reform.
Business representatives discussed their individual
experiences with corruption, highlighting how tenders are
tailored to particular bidders and describing the
bureaucratic pitfalls that are used to thwart unwanted bids.
Passage of the anti-corruption package is important to the
AmCham, as it believes the window of opportunity to take
action is prior to the upcoming election. AmCham also
understands that enforcement is critical to solving the
corruption problem, and is lobbying parliament for
legislation that addresses core problems.


13. (SBU) AmCham members have warned that Pecina's package
does not go nearly far enough, and AmCham has reached out
directly to PM Fischer to express their concerns over
corruption and has offered concrete suggestions to combat it.
These include the abolition of bearer bonds; a requirement
that all bidders for government contacts reveal their true
owners; tighter restrictions on the use of no-bid contracts;
requiring decisions to use no-bid contracts be made by the
cabinet and not individual ministries; requiring government
entities to report not only the bid price but the actual
price of contracts following cost overruns; and joining the
Convention on the Protection of the European Communities

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Financial Interests and the Convention on the Fight Against
Corruption Involving Officials of the European Communities or
the Officials of EU Member States.

A Matter of Perspective -- and Leadership
-------------- = --------------


14. (C) Comment: The Czech Republic ranked 52nd out of 180
on the TI 2009 corruption perceptions index; so corruption
here is not nearly in the same league as European countries
further east. However, among EU countries on the TI index,
the Czech Republic is tied for 20th out of 27. Corruption is
a serious problem here, inhibiting business, including U.S.
business, and poisoning domestic politics. The Czechs can
and should do better. Pecina's proposal is a step in the
right direction, but ultimately the solution to the
corruption problem will require electing a strong, committed
leader who has a like-minded cabinet. Unfortunately, no such
political leader has yet emerged. Until one does, the Czech
public will remain rightly skeptical of its leaders, equating
politics with "corruptionism." End Comment.
Thompson-Jones