Germany - Corruption
Among industrialized countries, Germany ranks 11th out of 180, according to Transparency International’s 2018 Corruption Perceptions Index. Transparency International, based in Berlin, is present in 122 countries, with bureaus in 87 of them. The organization's yearly index targets not only developmental countries, but major industrial nations as well. German companies used to be able to deduct pay-offs made as part of deals in other countries from their German taxes -- something not only widely practiced, but accepted in the past.
Bribery is not unheard-of in the German military: In January 2022, Osnabrück prosecutors announced that, after a three-year investigation, it was pressing charges against several individuals, including bribery charges against a cost-checker in the German Navy arsenal. The charges related to the restoration of the Gorch Fock training ship, which ballooned from around €10 million to €135 million. Nearly €30 million of public money is believed to have been lost, prosecutors said.
That might be an isolated case, but there is evidence that the German military is becoming more vulnerable to inefficiency and corruption. The 2020 Transparency International report suggested that compliance procedures had been hollowed out in the Bundeswehr. "Lack of capacity and expertise are manifest at several key points along the procurement process," the report said. "Government staff are in a poor position to determine whether costs are proportionate."
TI found that the government, by transferring expertise to the private sector, was becoming more reliant on manufacturers to tell them what is the best equipment to buy. Staff capacity to make independent assessments has been compromised. Citing one example, TI noted that in 2012, an independent review team in the Defense Ministry that was supposed to be a "safeguard against ill-advised procurement decisions" was folded into the ministry's political department, "effectively dissolving it."
The revelations gleaned in September 2020 from the leaked FinCEN files suggest Deutsche Bank's top management knew about suspicious transactions amounting to over $1 trillion dollars. In the years since the global financial crisis hit in 2007 and 2008, Germany's top bank, with its 150-year legacy, continued to make headlines for all the wrong reasons. Many of the transactions deemed suspicious could have enabled the circumvention of sanctions on Iran and Russia. The leaked FinCEN files suggest the bank was aware it was facilitating suspicious transactions amounting to over $1 trillion dollars, including for a period after it had promised to clean up its act.
Some sectors including the automotive industry, construction sector, and public contracting, exhibit political influence and party finance remains only partially transparent. Nevertheless, U.S. firms have not identified corruption as an impediment to investment in Germany. Germany is a signatory of the OECD Anti-Bribery Convention and a participating member of the OECD Working Group on Bribery.
Over the last two decades, Germany has increased penalties for the bribery of German officials, corrupt practices between companies, and price-fixing by companies competing for public contracts. It has also strengthened anti-corruption provisions on financial support extended by the official export credit agency and has tightened the rules for public tenders. Government officials are forbidden from accepting gifts linked to their jobs. Most state governments and local authorities have contact points for whistle-blowing and provisions for rotating personnel in areas prone to corruption. There are serious penalties for bribing officials and price fixing by companies competing for public contracts.
According to the Federal Criminal Office, in 2017, 63 percent of all corruption cases were directed towards the public administration (up from 49 percent in 2016), 22 percent towards the business sector (down from 30 percent in 2016), 12 percent towards law enforcement and judicial authorities (down from 18 percent in 2016), and 3 percent to political officials (same as in 2016).
In 2004, two German institutions, a top-flight soccer club, TSV 1860 Munich and the nation's railway company Deutsche Bahn, made unwanted headlines for bribery and contract irregularities. Corporate scandals at TV network ARD, carmaker Volkswagen and chipmaker Infineon dominated headlines in 2005 and left many wondering if Germany, once thought squeaky clean, was becoming increasingly corrupt. Munich prosecutors confirmed that a top manager at chipmaker Infineon took more than 250,000 euros ($304,000) in kickbacks for motor sports contracts, and the company's management allegedly knew about it since 2004. That came on the heels of a bribery and corruption scandal at carmaker Volkswagen which has cost three high-level executives and the head of the company's works council their jobs. The allegations include contract kickbacks and payments to work council members for luxury trips and even prostitutes.
"Deutsche Bank" translates as "German Bank" and is a German global banking and financial services company with its headquarters in Frankfurt. Deutsche Bank isn't new to criminal investigations, fines and settlements. That's why it's share price has slid from almost €90 before the 2007/8 financial crash to €8.25 in trading on 29 November 2018. In 2009, after an internal investigation, Deutsche Bank admitted it had hired a detective agency to spy on people who were considered threatening for the bank – including a shareholder, a journalist, and a member of the public.
Deutsche Bank was one of a series of lenders guilty of selling and pooling toxic financial products in the lead-up to the 2007 and 2008 financial crisis. The bank signed a $7.2 billion settlement with the US Department of Justice in 2017, after being accused of having sold investors bad mortgage-backed securities between 2005 and 2007.
In April 2015 Deutsche Bank was fined a record $2.5 billion dollars bv US and British authorities for its role in an interest rate scam between 2003 and 2007. The bank's London subsidiary pleaded guilty to counts of criminal wire fraud, after it was accused of fixing interest rates like the London Interbank Offered Rate (Libor), used to price a hefty amount of loans and contracts across the world. After the Libor scandal fines, Deutsche Bank agreed to a hefty batch settlement with the US financial authorities. This time, it was for violating US sanctions against a number of countries, including Iran, Syria, Libya and Sudan.
In 2017, Deutsche Bank was fined a total of $630 million (€553.5 million) by US and UK financial authorities over accusations of having laundered money out of Russia. According to US and British regulators, Deutsche Bank's anti-money laundering control mechanisms failed to spot sham trades with a value of up to $10 billion.
A prominent corruption case concerns the “BER” Berlin Airport construction project. Proceedings were opened in October 2015 against a manager of the airport operating company. In October 2016, the Cottbus district court sentenced the manager to 3.5 years in prison and a fine of €150,000 (USD 160,000) on the grounds of corruption. Two leading employees of a technical company working on electricity, heating, and sanitary equipment received suspended jail sentences.
Parliamentarians are subject to financial disclosure laws that require them to publish earnings from outside employment. Disclosures are available to the public via the Bundestag website (next to the parliamentarians’ biographies) and in the Official Handbook of the Bundestag. Penalties for noncompliance can range from an administrative fine to as much as half of a parliamentarian’s annual salary.
On 28 February 2018, Bundestag member Marcus Held (SPD) resigned as mayor of Oppenheim in Rhineland-Palatinate after he was charged with corruption. Mainz prosecutors investigated Held for embezzlement and bribery pertaining to irregular real estate dealings in Oppenheim. The Bundestag lifted Held’s immunity in July and November 2017. As of September 2018, Held was still a member of the Bundestag, but he went on medical leave in January, and at year’s end his seat was inactive.
Donations to political parties are legally permitted. However, if they exceed €50,000, they must be reported to the President of the Bundestag. Donations of €10,000 or more must be included in the party’s annual accountability report to the President of the Bundestag.
State prosecutors are generally responsible for investigating corruption cases, but not all state governments have prosecutors specializing in corruption. Germany has successfully prosecuted hundreds of domestic corruption cases over the years, including large scale cases against major companies.
Media reports in recent years about bribery investigations against Siemens, Daimler, Deutsche Telekom, and Ferrostaal increased awareness of the problem of corruption. As a result, an increasing number of listed companies and multinationals have expanded their compliance departments, tightened internal codes of conduct, established points of conducts, and offered more ethics training to employees.
The Federation of Germany Industries (BDI), the Association of German Chamber of Commerce and Industry (DIHK) and the International Chamber of Commerce (ICC) provide guidelines in paper and electronic format on how to prevent corruption in an effort to convince all including small- and medium- sized companies to catch up. In addition, BDI provides model texts if companies with two different sets of compliance codes want to do business with each other.
|
NEWSLETTER
|
| Join the GlobalSecurity.org mailing list |
|
|
|
