domingo, 23 de outubro de 2016

Spain’s kickback culture on trial

Spain’s kickback culture on trial
Court case involves the PM’s party, millions of euros and a man nicknamed Don Vito.

By DIEGO TORRES 10/17/16, 5:29 AM CET Updated 10/18/16, 6:37 PM CET

MADRID — Spain’s national criminal court, the Audiencia Nacional, is a busy place these days, as it hosts around 300 witnesses and 37 defendants, many of them key figures in Mariano Rajoy’s Popular Party, charged with fixing public tenders worth over €350 million.

The result of nearly nine years of investigations, the trial in the “Gürtel case” began this month and will last for months. So big that it’s been divided into two parts, it has the scale, ambition and shock value of The Godfather, plus an alleged gang leader, Francisco Correa, who prided himself on the nickname Don Vito after Marlon Brando’s character in Coppola’s classic. (Gürtel was the codename given to the investigation. It means “strap” in German, and the Spanish word for strap is correa.)

Far from being fiction, however, the case reveals venal habits among politicians that fueled the Spanish construction bubble and subsequent depression that pushed unemployment over 25 percent. It’s the first in a series of macro trials that will examine corruption in the boom years, tainting not just the PP but their Socialist rivals, a pro-independence Catalan party, and others.

One defendant is Luis Bárcenas, former treasurer of Rajoy’s PP, accused of stashing €48 million in Swiss bank accounts. The investigation describes a scheme of kickbacks in cash, prostitutes or gifts from real-estate developers, construction firms and other businesses in exchange for public contracts between 1999 and 2005. The court will hear that this structure illegally financed the PP, funding campaigns and extra undeclared wages for party leaders.

By 2006, Spain was building more than 750,000 houses a year, more than Germany, the U.K., France and Italy combined.
Giving testimony in court, Correa recounted: “In 1996, Luis Bárcenas told me: ‘You have contact with businessmen and I have contact with politicians. We’re going to try and do it so that when there are public tenders we favor businessmen that can later collaborate with the party.’”

“I spent day and night in Génova [the PP’s headquarters in Madrid]. I spent more time there than in my office. It felt like home,” Correa said in another part of his testimony.

Criminal motives

Corruption is key to understanding the policy decisions that led to Spain’s ill-fated real estate and infrastructure boom, said Luis Garicano, a professor at the London School of Economics and the leading economic voice of centrist party Ciudadanos.

By 2006, Spain was building more than 750,000 houses a year, more than Germany, the U.K., France and Italy combined. Construction accounted for nearly 16 percent of GDP in 2007, compared with around 9 percent in its biggest European peers. Nearly a quarter of the jobs created in the country between 1996 and 2007 were in the construction sector.

“This can’t be explained without the kickbacks,” said Garicano, who believes that only Italy’s Tangentopoli scandal in the 1990s can compare with the corruption of Spain’s boom times.

“There were mistakes and there were also criminal motives guiding part of the economic policy being implemented,” said Nacho Álvarez, economic policy spokesman for the far-left Podemos.

A complex series of factors inflated the bubble. Much of the cheap euro credit flooding into the country was handled by loosely regulated public financial institutions called cajas which were directly managed by politicians. Local officials had huge and arbitrary powers over urban planning, while real estate played a key role in funding local governments. There were major tax incentives for buying homes, as opposed to rentals, and the economy was awash with cash.

“You’ve got a criminal triangle among politicians, who provide permits; the cajas, controlled by politicians, which finance operations; and the construction companies, which pay kickbacks and do the work,” summarized Garicano.

Grand scale

“These trials are the terrible climax of the real-estate bubble and what was a true culture of pelotazo (making money fast) in our country,” said Álvarez of Podemos.

Such policies flourished under the auspices of flawed legal and political systems that made Spain more vulnerable to corruption than most of its European peers. Víctor Lapuente, a lecturer at the University of Gothenburg who has done extensive research into the subject, said Spain had little of the petty corruption often associated with developing countries, such as bribing police, but plenty of “grand corruption” such as that revealed in the Gürtel case.

“During many years, we’ve seen a culture of impunity and a series of excesses that would have been unthinkable in many other countries” — Víctor Lapuente, lecturer at the University of Gothenburg
“During many years, we’ve seen a culture of impunity and a series of excesses that would have been unthinkable in many other countries,” Lapuente said, adding that foreign colleagues often can’t believe the enormous amount of money involved in Spanish corruption cases.

The two main causes, he said, were the extreme politicization of local government where mayors wield big decision-making power and aren’t checked by a merit-based bureaucracy; and a lack of transparency in public contracts at all levels of government.

For Eva Belmonte, a journalist working for Civio, a pro-transparency NGO, there has been surprisingly little progress in terms of monitoring such corruption since the kickbacks in the Gürtel case happened more than a decade ago. “The regulation of public contracts has hardly been changed,” she said, adding that the country still lacked a watchdog that could effectively monitor public-sector contracts for the property and construction sectors.

Other experts are more optimistic that progress has been made. Garicano said the mentality of ordinary citizens had changed, with less public tolerance and greater consciousness of the cost of corruption for the Spanish economy.

“The positive news is that we have become shocked [by these trials] and this means that we aren’t as tolerant of corruption as we may have thought,” said Lapuente.


Diego Torres  

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