Wednesday, November 16, 2005

How The UN And EU Became Corrupt

The EU auditors just rejected its accounts for the eleventh year running and the UN reinstated its only staffer fired for the Oil-for-Food scandal. They highlight a dysfunctional feature of international organizations - they become as corrupt as the people running them.

Any company whose auditors qualified its accounts this severely, would have to cease trading:

The European Union's financial watchdog yesterday refused to give a clean bill of health to the EU's annual accounts - for the 11th year in a row.

The European Court of Auditors said it was unable to give a formal statement of assurance on the 2004 budget of almost £70 billion.

David Bostock, the UK member of the court, said that for the first time, IACS had "reduced the risk of error for most agricultural expenditure to an acceptable level". But, he went on, it was still not possible to sign off EU spending on aid for poorer regions, aid and diplomacy, consumer protection and other areas, including "more complicated areas of agricultural spending".

EU auditors did provide some examples of apparent fraud. They cited a Greek farmer who claimed to have lost 501 sheep to disease and wolves between 2002 and 2004 and had certificates from the local veterinary office confirming his losses. Yet he was also claiming that his herd was unchanged in size - a phenomenon he could not explain, when pressed.

And a management that oversaw the biggest fraud in history and didn't hold
one employee responsible would find itself in jail, Enron style:

The United Nations reinstated the only U.N. official who was fired over the Iraq Oil-for-Food scandal, after an internal appeals body ruled that he had done nothing wrong, according to a letter made public Tuesday.

The decision was made Monday and Joseph Stephanides, fired May 31, received the letter Tuesday maintaining that he violated staff rules by showing preference to one bidder for an Oil-for-Food contract but essentially acknowledging the punishment was too harsh.

Stephanides, a 60-year-old Cypriot national, had been scheduled to retire in September and the move gives him his pay up to that point.

Many staffers on international institutions are from low-trust societies where corruption is normal. People from low-scoring nations aren't necessarily personally corrupt, but will have been conditioned to accept business practices which Anglo societies consider dishonest. Here are some UN and EU actors with their home countries'
2005 Corruption Perceptions Index (CPI - least corrupt scores 10, most corrupt scores 0):

RoleCountryCPI Score
Prime MinisterUK8.6
UN Secretary GeneralGhana3.5
UN Head of Oil-for-Food Cyprus5.7
UN Reinstated StafferCyprus5.7
EU PresidentPortugal6.5
EU VP Anti-FraudEstonia6.4
EU DefrauderGreece4.3

This explains why the UN is corrupt - its leader comes from a place scoring 3.5 - the same level as Mexico and Turkey. The CPI scores of the countries of the EU leadership are not as low, but is still lower than all the EU northern members and closer to the more corrupt southern members.