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Portugal - Corruption

Corruption plays a limited role in Portugal's business culture. Although US firms occasionally encounter limited degrees of corruption in the course of doing business in Portugal, they do not identify corruption as an obstacle to foreign direct investment. In Transparency International's 2010 Corruption Perceptions Index, Portugal registered 6.0 on a 10-point scale with 10 the least corrupt and ranked 32 out of 178 countries (listed from least to most corrupt), behind Spain (30) and ahead of Botswana, Puerto Rico, and Taiwan (all ranked 33) and South Korea (39).

Portugal has ratified the OECD Anti-bribery Convention and has passed legislation to bring its criminal code in compliance with the Convention. Tax evasion remains a problem for the government, which has implemented several initiatives to improve collection rates. The Socrates Administration took steps to address the corruption that businesses, both U.S. and other, face in Portugal. In July 2010, Portugal passed a series of new laws to combat corruption that included increased penalties for bribery (both active and passive) and extended statutes of limitations for certain corruption-related crimes, such as bribery and abuse of official function. These new laws have not yet resulted in any major prosecutions.

In the past, businesses frequently complained about red tape with regard to registering companies, filing taxes, receiving value-added tax refunds and importing materials. Decision-making tended to be centralized, and obtaining government approvals/permits was often time-consuming and costly. In the past few years, Portugal has undertaken efforts to improve government efficiency.

Allegations of corruption committed by Prime Minister Jose Socrates dominated political commentary in Portugal in early 2009. Socrates headed the Socialist government, but he was Environment Minister for the latter half of the 1995-2002 Socialist government of PM Antonio Guterres. During that time, the allegations run, Socrates took bribes to waive environmental regulations and allow construction of a shopping mall on protected wetlands near Lisbon. The payoffs were not made to Socrates directly, but to family members, including his mother, uncle, and cousin.

In addition to being splashed across every newspaper in Lisbon, these allegations were specified in a Letter Rogatory sent to the Portuguese government by the UK's Serious Fraud Office, which was investigating six individuals in the UK for bribery and corruption. Specifically, the charges related to the involvement of British property developer, Freeport PLC, in the construction of the 250 million euro Freeport shopping mall in 2004 on protected marshlands in Alcochete, across the Tagus River from Lisbon. Freeport had hired consulting firm Smith & Pedro to secure permits and approvals, and they realized the project could only move forward if the site's boundaries were redrawn and environmental regulations were waived. However, then-Environment Minister Jose Socrates rejected the environmental impact study (EIS), saying the plan contradicted the GOP's intentions in designating the area as a protected environmental zone.

In January 2002, Smith & Pedro and Freeport officials met with Socrates and, according to the Letter Rogatory, Socrates solicited a bribe in return for approving the EIS. The Letter Rogatory lists four Portuguese persons as having participated in the scheme: Jose Socrates, an official in the Alcochete city hall, and two representatives of Smith & Pedro. Freeport allegedly agreed to funnel the money through Smith & Pedro to Socrates' uncle and cousin, and the EIS was approved two months later, the very day that national elections swept the Socialists and Minister Socrates from government. Separate allegations refer to payments to Socrates' mother as well.

The original allegations were developed by Portuguese authorities and shared with the London Police in August 2005. The London Police then obtained and shared with Portuguese authorities a clandestine March 2006 video of Charles Smith, of Smith & Pedro, discussing the payment of bribes to Socrates' cousin. British and Portuguese law enforcement are reportedly cooperating effectively on the case (which may be a positive consequence of the fumbled high-profile investigation into the disappearance of British child Maddie McCann in Portugal in 2007).

Socrates' uncle and cousin, the ones who allegedly received the bribes, did him no favors. The uncle told journalists that he would not need to take bribes because he was already rich, and he gave amusingly contradictory accounts about how he had voted in previous elections. The cousin was vacationing in Nepal, but in his many telephone interviews he said he will only return to Portugal if the prosecutor's office pays for the trip.

The 2009 Parliamentary campaign season was dominated by front-page scandals, rumors, and negative campaigning (e.g., a vote-buying scheme allegedly involving Lisbon PSD candidates who are also under investigation for fraud and corruption in a separate case; a wiretapping scandal implicating the PS government; and a media scandal allegedly involving the PS) that tarnished the images of both major parties and distracted voters from substantive issues. Corruption allegations against Socrates from his time as Environment Minister will not likely result in any formal sanction, but tarnished his image. The PSD was not able to capitalize on Socrates' corruption allegations as a number of its own leaders face similar allegations.

The Serious Fraud Office investigation relating to the development of the Freeport retail outlet in Alcochete, Portugal, was closed 13 November 2009. The Serious Fraud Office continued to provide such assistance as is required to the Portuguese authorities by way of mutual legal assistance, but took no action on its own.

On 10 December 2009, the opposition succeeded in passing three of four PSD-sponsored anti-corruption bills, as all five opposition parties joined forces to criminalize "illicit enrichment" in the exercise of public functions. The CDS/PP agreed to abstain on the vote, while the Social Democratic Party, Communist Party (PCP), Left Bloc (BE), and Green Party (PEV) supported the PSD resolution. The Socialists alone voted against the bill on constitutional grounds, arguing that the definition of "illicit enrichment" was unconstitutionally vague and that, in any event, adequate laws were already on the books to combat corruption.

Corruption allegations affect virtually all the parties, but Portuguese voters appear not to be bothered by them. Polls indicate that most voters think all politicians are corrupt, so specific allegations are not a bar to office.

In July 2014, Ricardo Salgado, head of the Espirito Santo banking family and former chief of Banco Espirito Santo, was named as a suspect in a long-running money-laundering and tax evasion investigation. His management of the bank, that had to be rescued by the state, was the target of another inquiry.

On 13 November 2014 the head of Portugal’s immigration service, Manuel Palos, was arrested along with several other officials on suspicions of corruption linked to the issuing of so-called “golden visas” to wealthy foreign investors. The inquiry also forced Interior Minister Miguel Macedo to resign.

Portuguese police arrested former Socialist prime minister, Jose Socrates, and three other people in an investigation into suspected tax fraud, corruption and money-laundering, the public prosecutor’s office announced on 22 November 2014. The arrest, the first involving a former premier in Portugal, followed detentions of other prominent people in separate inquiries over the previous few months as prosecutors intensified efforts to crack down on corruption in a country notorious for its slow justice system.

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