Life in the Rear-view Mirror

The Growth of Corruption

When social mores decay, corruption cannot be too far behind. When people are not held accountable for their actions, it emboldens them. Corruption is an insidious process. It starts off slowly, as to be imperceptible, and picks up speed feeding on itself. It's now become very visible, and it seems as if it's the new norm. For decades we have made fun of Latin American countries for their corruption, but we are quickly closing the gap. Imagine! We are on the path to becoming a banana republic!

Political corruption is as old as politics, and will likely see no end. Whereas, in my youth age, it used to be rare and covert, it's now frequent and overt. Today's governments bear no resemblance to those of sixty years ago. The U.S. Congress, for example, has become a den of thieves and felons. It has attracted people with all sorts of criminal minds and records. Many have been charged for criminal activities and convicted; and some even did jail time, but some special individuals got their sentences commuted by the white house.

What are the crimes that congressmen and women have been convicted for? They include: fraud, conspiracy, extortion, racketeering, money laundering, bribery, sexual harassment, tax evasion, corruption of public officials, voter intimidation, and manslaughter. Corruption is not limited to Congress, however. In the U.S., during the four-year period 2010 to 2013, more than seventy elected officials were convicted and jailed for many of the same crimes listed above. Bribery, fraud, and theft were the three highest offences.

Canada is not any better. We had four senators investigated with defrauding the country with illegal expenses. One retired from the senate as soon as the scandal broke, and the other three were expelled much later, but not one of them has been jailed for the offences, at least not yet. Then we had the notorious mayor of Toronto, a Rambo-style politician who bullied everyone around him, and had the unique honour of being the only mayor to be stripped of his legal powers: he remained mayor in name only because he didn't have the integrity to step down. His family's political power and wealth kept him from being charged for his many felonies, including smoking crack-cocaine and driving under the influence. The other felons he hung around with didn't have the same political clout and are in jail, where they should be. But this tells us that we have one justice system for the mighty and powerful and another for everyone else. If this is not corruption, what is it?

Political corruption is not just a North American affair. Europe's latest scandal is that of ex-president Nicolas Sarkozy, whose being investigated for influence peddling, corrupting officials, and benefiting from state secrets. Before him, there was ex President Jaques Chirac, and ex Prime Minister Alain Juppé, both convicted for felony after they left office. How can we forget convicted felon, and ex Prime Minister, Silvio Berlusconi, who dominated European news for a long time. He was charged on many counts, but used his position of power to change laws that gave him greater immunity from prosecution. Before him there was Giulio Andreotti, who was convicted for having aided the mafia, and Bettino Craxi, who fled the country to avoid being jailed. Even Germany, the more law-abiding of European countries, had its share of governing felons. For example, former chancellor Helmut Kohl, the person who reunited East and West Germany, was forced to admit that he had taken millions in illegal donations, but refused to pay them back.

Politicians no longer care if they are caught with their hands in the cookie jar because they can use their political power and influence to stay out of jail. All they care is getting re-elected, and for that they just need money from rich benefactors, who are not particular about moral values. As a result, governments have become myopic, looking only as far as the next election, at the expense of the long-term needs of the nation. This is happening at a time when long-term policy is essential for our very survival. Overpopulation and overconsumption are contaminating our biosphere and our health is paying the price. This may sound alarmist, but it will become clear, in later chapters, that it isn't. The World Health Organization has already declared the air we breathe to be dangerous to our health!

Politicians and government officials were not alone. The corporate titans, who are in the same league, did not disappoint (actually they did - big time!). They had more than their share of malfeasance! There was Enron, the biggest energy company in the world, valued by the market at $63 billion, that had a spectacular collapse after it was learned that management had been cooking the books. Most of the executive team was charged and sentenced to long prison terms. It was such an insidious fraud that it even brought the collapse of its auditor, the venerable firm of Arthur Endersen, one of the leading auditors in the world. Enron's fall inflicted pain not only on its shareholders, who lost everything overnight, but also on its employees, and pensioners, who could ill-afford it.

The Enron collapse happened at the end of 2001. In 2002, WorldCom, valued by the market at $107 billion, replaced it as the largest bankruptcy. Financial fraud was also at the root of its collapse. Its founder, and CEO, was sentenced to a long jail term. Then there was Tyco International. Considered a safe, blue-chip investment, shareholders of this company were defrauded by its CEO and other executives who siphoned out hoards of cash. When the scandal broke, the company lost 80% of its market value, leaving shareholders hung to dry. Eventually the executives were brought to justice and sent to jail for 25 years.

In December of 2008, his own sons turned in the biggest fraudster of all times to the police. Bernard L. Madoff, the former chairman of the NASDAQ, who was very respected in financial circles, admitted to defrauding his hedge fund investors of $50 billion dollars in a sophisticated Ponzi scheme. However, his story paled in contrast to the financial crisis that was unfolding at the time.

The widespread sub prime mortgages, which had fuelled the real estate mania of the 00s, had been packaged in what were called collaterized-debt-obligations, and sold widely around the globe. When the real estate market collapsed, the securities became caustic and trade in them ceased, causing the collapse of Lehman Brothers and the ensuing financial debacle. Without humongous government bailouts, at taxpayers' expense, the entire global financial system would have collapsed. All the big banks and mortgage companies knew what was happening, but no one raised a red flag. They were all too busy making loads of money. When the crisis hit, the government saved the bankers and mortgage companies, and their CEOs received big bonuses; the homeowners, whose house values had dropped 50% or more, were the only ones who paid the price. They lost their houses and whatever equity they had in them.

Canada had its share of corporate malfeasance. The biggest case was the scandal involving Bre-X Minerals, whose executives perpetrated one of the biggest stock swindles in history. It had a mining property in Indonesia, which the company claimed had more than 200 million ounces of gold. Nothing came close to it in size. When the news was announced, Bre-X shares shot up to $280, giving the company a market value of over $4 billion. Those who sold their shares before the fraud was discovered became millionaires, and many insiders sold at the peak when innocent people were buying. The meltdown happened pretty quickly, when news that the site geologist disappeared in the jungle and couldn't be found spread to Bay and Wall Streets. The court case lasted 17 years, but nobody was ever sentenced.

Corporate fraud is as old as the stock market itself, but never before has there been massive fraud as we have seen in the dying years of the old century and in the first decade of the twenty-first. These were deliberate, massive schemes perpetrated at the highest levels of the corporations. Business ethics and morals have reached a deplorable new low.

Why is there a lot more corruption now than there was half a century ago? Why have we done nothing about it? We all get what we deserve, but is this what we want? These are questions that we should all be discussing. Why aren't we? Have we become a nation of couch potatoes, too engrossed in sports rather than politics, and too absorbed in what matters little and not enough in what matters a lot? These are important questions for the future of our country, and the future of our children and grandchildren. They deserve our attention and debate, for there is no other way of reversing this vicious trend that is converting our country from a model of democracy into a model of a banana republic.