BALKAN BLOG: Romanian anti-corruption beacon extinguished

BALKAN BLOG: Romanian anti-corruption beacon extinguished
Romanian anti-corruption protesters forced the government to backtrack in February 2017, but since then they have been worn down by the ruling coalition's dogged determination to amend the judicial system.
By Clare Nuttall in Bucharest July 10, 2018

The white knights of the region-wide fight against corruption have been falling like snowflakes. In the past few days leading anti-graft figures have been sacked Romania and Montenegro, while Poland has embarked on a wholesale purge of Supreme Court judges. The remarkable gains made by several East European states in the crusade against corruption in the name of the rule of law can no longer be considered secure. 

The news from Bucharest is particularly dire. National Anticorruption Directorate (DNA) head Laura Codruta Kovesi is an icon of the struggle against official corruption, not only for Romanians but for all countries in the region. Since she took over at the DNA in 2013, Kovesi’s achievements have been repeatedly praised in European Commission reports on the Southeast European country, and she also enjoys widespread public support for the DNA’s uncompromising pursuit of corrupt officials. She was sacked by decree by President Klaus Iohannis on July 9.

Romania’s ruling coalition has been gunning for Kovesi, as they are all targets for her investigations. And given Romania’s history as one of the most corrupt countries in Europe, everyone has a skeleton or two in the closet. Iohannis says he had no choice after  a constitutional court ruling ordered him to dismiss Kovesi.

The coalition headed by the Social Democratic Party (PSD), whose leader Liviu Dragnea was recently sentenced in a corruption case, has been working for months to remove Kovesi. It appealed to the Constitutional Court after Iohannis refused to endorse the government’s request to dismiss her. The court ruled on May 30 that Iohannis must dismiss the head of the DNA, and after more than a month of inaction that sparked threats from the ruling coalition of an impeachment attempt, Iohannis caved and complied with the court’s ruling.

“President Iohannis believes that Romania cannot take steps backwards from the status of country where the law rules and the supremacy of the Constitution is respected,” said Iohannis’ spokesperson, explaining the decision. 

The future of the DNA is now in limbo while it remains to be seen who will replace Kovesi and to what extent the agency will remain independent. 

Iohannis announced he was going to dismiss Kovesi just days after Montenegro’s parliament voted to remove Vanja Calovic-Markovic, executive director of the anti-corruption NGO MANS, from the council of the Agency for Prevention of Corruption (APC), citing allegations of conflict of interest. Calovic-Markovic was accused of securing a contract worth €149,000 for her NGO with the APC.

However, MPs were criticised by observers including Transparency International, for dismissing Calovic-Markovic without waiting for a court verdict. Nor was she given any opportunity to respond to the accusations in the politically charged case. 

The DNA, and to a lesser extent the APC, have been beacons in emerging Europe but nascent copies are being undermined across the region.

Poland has gutted its Supreme court of independent judges, who are shortly to be replaced with hacks hired by the ruling Law and Justice (PiS) party. Turkish president Recep Tayyip Erdogan just took over as the all-powerful executive president and amongst his first acts took control of the appointment of the governor of the central bank ending its independence. While Ukraine recently passed laws to establish an anti-corruption court (ACC), but included a “get out jail free” clause that allows any politician convicted by the court to appeal the decision in regular (aka corrupt) courts. Go further east, and most countries don't even bother with the veneer of any sort of anti-corruption organ, using the police and secret services instead - if they crack down on graft at all.

Powerful enemies

Both Kovesi and Calovic-Markovic had fallen foul of powerful politicians in their countries in their campaigns to root out graft amongst the elite.

The DNA’s annual summary of its probes and prosecutions invariably includes an impressive tally of government ministers, MPs and dozens of lower level and regional officials. Last year alone, the DNA sent to trial 997 defendants, including three ministers, a former parliament speaker and six MPs. The number of cases completed by DNA prosecutors increased by 16.5% y/y to more than 3,800 in 2017.

The government, led by the PSD, has long sought to remove Kovesi, as it is often the subject of her probes, although opposition politicians are not ignored by the agency. 

In a dramatic case concerning fake jobs for PSD workers, ruling party leader Dragnea was sentenced to three years and six month in prison only last month. Indeed, the party’s desire to protect Dragnea and other top politicians from prosecution is seen as the main motivating force, not only behind Kovesi’s removal, but also the wider overhaul of the justice system and criminal legislation. 

This started in early 2017, when the government attempted to force through legislation partly decriminalising abuse of office, though later had to backtrack when more than half a million Romanians took to the streets in February 2017 in protest – the largest protests since the fall of communism.

Since then, however, the ruling coalition has relentlessly pushed its agenda, while numbers at the protests have dwindled as demonstrators lose hope. Many of the young, urban Romanians who were out on the streets in early 2017 are now talking about emigrating, as they no longer have any confidence that the situation in their country will improve. 

The DNA itself has not been above reproof. The agency has been dogged by its links to the Romanian intelligence services. There are legitimate concerns over the involvement of the intelligence services in investigations with an impact on domestic politics, these revelations were naturally seized upon by Kovesi’s opponents who made much of a purported return to the bad old days when the communist era Securitate terrorised Romanian citizens. Another scandal concerned the alleged fabrication of evidence at the Ploiesti local office in a high profile case, which was poorly handled by Kovesi. 

The DNA’s effectiveness was further called into question when it failed to secure convictions of high-profile officials in several recent cases. The agency’s reputation was badly damaged by the collapse of one of Romania’s biggest ever corruption probes (dubbed the Microsoft case) on a technicality. Dragnea’s predecessor as head of the PSD, former prime minister Victor Ponta, was also acquitted of corruption charges in May, allowing him to return to the political fray. 

Overall, however, the DNA has been instrumental in cleaning up corruption in Romania. Its ability to secure convictions and send ministers and party heads to jail has had a profound impact on corruption by making it a dangerous occupation. Romania’s international porters including fellow EU member states and the US have strongly criticised Bucharest’s judicial reform efforts, urging in late June for “ all parties involved in amending Romania’s criminal and criminal procedure codes to avoid changes that would weaken the rule of law or Romania’s ability to fight crime or corruption”. 

“Romania has shown considerable progress in combatting corruption and building effective rule of law. We encourage Romanians to continue on this path,” the statement adds. 

Taking on the “first family”

Critics have similarly slammed Calovic-Markovic’s dismissal in Montenegro as politicised, and most likely intended as retribution for her NGO's exposés concerning President Milo Djukanovic and his family. 

MANS called the parliament's decision part of a “political cleansing” undertaken by Djukanovic. “[I]t is completely clear that the replacement of Calovic-Markovic is revenge for revealing criminal activities of Djukanovic and his closest circle, and an attempt to stop the fight against corruption,” the NGO said in a statement.

Under Calovic-Markovic’s leadership, the NGO has published evidence connecting Djukanovic and his family to allegedly corrupt deals. Most recently it claimed majority state-owned power utility EPCG had purchased Rudnik Uglja coal mine from shareholders, including the president’s brother Aco Djukanovic, at inflated prices. 

Calovic-Markovic has a long history of trouble with the Montenegrin authorities. She has been tried and fined by the courts several times. In 2013, she was fined €600 in absentia by a Montenegrin court for her participation in an action accusing the constitutional court of serving the interests of the first family. Her lawyer argued that the court’s decision to fine her in absentia was in breach of both Montenegrin and EU legislation.

At the same time as removing Calovic-Markovic, MPs also voted to dismiss Irena Radovic from the post of deputy central bank governor. Radovic claimed she was dismissed because she failed to support governor Radoje Zugic, who is among Djukanovic’s most loyal party members, after he ordered her to impose tougher control over some banks while leaving others to operate without any supervision, daily Vijesti reported. For his part, Zugic accused her of incompetence and lack of professionalism.

Montenegro can’t be seen as a beacon of the anti-corruption fight in the way Romania has been in recent years, as little has been achieved when it comes to throwing the book at corrupt top officials. When the former president of Serbia & Montenegro, Svetozar Marovic, was sentenced to 46 months in jail for his participation in the so-called Budva affair in 2016 it was hailed as a milestone in the country’s fight against top level graft. Yet despite admitting guilt, Marovic never actually went to prison, going missing shortly after he was sentenced by the judge.

In April, the European Commission slammed Montenegro for its lack of progress in the fight against organised crime in its progress report and said that the country needs to make further progress in most other areas. “Despite some progress, corruption is prevalent in many areas and remains an issue of concern,” the report noted. At the time, the EC also commented on “Challenges to the credibility, independence and priority-setting” of the Anti-Corruption Agency. 

Leading by example 

The effectiveness of the DNA in bringing top officials to account in Romania has naturally attracted the attention of the country’s neighbours to the south and east, who lag behind in the fight against corruption. 

Officials in Bulgaria, which was once well ahead of Romania but has recently languished and is now considered the most corrupt country in the EU, have been looking to the Romanian example to revitalise their own struggles against corruption. As far as ordinary people are concerned, Bulgaria is still years away from Romania, which is seen as the example of what could be done if only the right people are put in power.

In Bulgaria, the third government of Boyko Borissov promised to fight corruption — just as his two previous cabinets promised. The current government has established a new special prosecution unit that is supposed to fight high-level corruption. However, so far it has proven ineffective, as it has not launched a single new case. A recent report in daily Dnevnik revealed that so far the special prosecution has either worked on old cases or has filed cases where the procedures were not properly met or there is insufficient evidence to launch a trial. Four cases were ended by courts, while in one case the accused was found not guilty.

And with the ongoing implosion of the anti-corruption fight in Romania, what hope is there for its neighbour to the east, Ukraine, that together with Russia is ranked as the most corrupt country in Europe.

The ongoing struggle over the creation of the Anti-Corruption Court (ACC) illustrates the troubles Ukraine has had in making improvements, even with intense pressure from the International Monetary Fund (IMF) and other international donors. 

The ACC is intended to be one part of a triumvirate that will provide a politically independent mechanism for charging those in high office with corruption. However, the administration of President Petro Poroshenko has vigorously resisted international pressure to set the court up. When the law on the ACC was finally adopted, it had one critical loophole allowing regular courts to overturn ACC rulings on appeal. This was sneaked into the final draft of the law by the government. NGOs were up in arms at the loophole and have demanded its removal, as has the IMF’s managing director Christine Lagarde, who praised President Petro Poroshenko for putting the law through but said explicitly that the cause that allows decisions to be appealed in regular courts must be removed. The IMF has effectively frozen its desperately needed $17.5bn support programme for the Ukraine until the law is changed.

Doomed to be corrupt? 

For the most part, the East European states are more corrupt than their neighbours to the west, and corruption becomes even more endemic moving eastwards into Eurasia.

Watchdog Transparency International’s annual Corruption Perceptions Index (CPI), however, shows this is not always the case. The Baltic states and Slovenia are ranked less corrupt than long-term EU members Spain, Italy and Greece. Georgia is the bright spot in the Eurasian region, having climbed no less than 78 places on the index since the Rose Revolution in 2003. This all shows that corruption can be overcome; the pity is that it hasn’t been in so many countries, often due to a combination of stiff political resistance and institutional sluggishness.

Romania has made steady progress up the rankings on the CPI over the last decade or more, especially in the five years since Kovesi took over at the DNA in 2013, rising from 83rd place in 2003 to a respectable 59th in 2007 – on a par with both Hungary and Italy. 

Reformers in the CEE and Eurasian regions have some tough historical legacies to fight against. During the communist era informal networks and relationships were vital to securing scarce consumer goods, as well as doctors’ appointments, entrance to good schools and universities and so on. Long before that, regions like Central Asia and the Caucasus had entrenched systems of closely knit clans and extended family ties that persisted into the communist era and afterwards. In the chaotic early transition years opportunities for corruption were rampant due to the massive gains to be had from privatisations and the wild west style capitalism that raged in the absence of an effective institutional framework. After the legacy of communism was torn down it took a long time to build new institutions. The social breakdown also caused by the collapse of communism, which happened to varying extents in most of the region, forcing citizens back into relying on those they knew and trusted, ensuring the informal links of the communist era continued by creating a climate in which personal loyalties outweighed formal duties.

This isn’t to say countries from the former Eastern bloc are doomed to remain corrupt forever. In CEE it’s approaching three decades since the end of communism, while in the former Soviet countries it’s just 27 years; this is still a short time if you take into account that most were grappling with turbulent transitions and economic collapse for at least the first decade after the fall of the Soviet Union.

Those Western countries that score much better on the index typically made reforms a lot further back in their history — in the UK, for example, the civil service was a hotbed of patronage and nepotism in the 19th century, which was only changed with the adoption of the Northcote Trevelyan reforms that took many years to force past politicians to accept governmental service entrance exam rather than the known quantity of the sons and nephews of their associates and social equals.

The prospect of EU accession has been and still is an important impetus to address corruption among aspiring members. Yet backsliding has often been observed afterwards, meaning states from the region that have now been in the union for 14 years are still rated among the most corrupt. Moreover, the billions of euros of EU structural funds and subsidies heading east to the poorer members of the union represents a huge opportunity for fresh corruption, with notorious examples being nomination of Andrej Babis as Czechia’s prime minister even after he was charged with fraud in the Capi hnizdo (Stork Nest) case centred on a €2.3mn EU subsidy obtained a decade ago, and the “established system of organised fraud” uncovered by EU anti-fraud agency OLAF concerning the public lighting projects won by Elios, a company once co-owned by Hungarian Prime Minister Viktor Orban’s son-in-law, Istvan Tiborcz

Unlike the Czech Republic and Hungary, Romania and Bulgaria are considered by many to have been allowed into the EU too soon, before all the required reforms were carried out and they are therefore subject to the Cooperation and Verification Mechanism (CVM), a monitoring procedure that involves the issuing of annual reports on their activities to fight corruption and (in Bulgaria’s case) organised crime. 

Officials from both governments have expressed their hopes of exiting the rather humiliating CVM but this has not been enough to ensure they remain committed to the fight against corruption.

Similarly, in the climate of rising nationalism in the Visegrad Four countries in particular, their governments are less inclined to be shamed into staying on the reform path set by Brussels. A case in point is Poland, where the ruling Law and Justice Party defied tens of thousands of domestic protesters and international opprobrium to force the retirement of Supreme Court justices older than 65, effectively putting the government and president in control of the country's judicial system.

Undermining the EU’s ability to sanction Poland, Hungary has said it will stand by its neighbour thereby blocking any attempt to strip Poland of its voting rights which needs unanimity among EU members. Even the prospect of losing out on some of their EU funding has not been enough. 

The growing authoritarianism in some countries in the region goes hand in hand with corruption. As Transparency International pointed out in its 2017 CPI, the authoritarian shift in numerous countries hinders anti-corruption efforts and threatens civil liberties. “Across the region, non-governmental organisations (NGOs) and independent media experienced challenges in their ability to monitor and criticise decision-makers,” the report said. 

While the axe taken to judicial independence in Poland is motivated more by the government’s pursuit of its illiberal agenda, and Bucharest’s judicial “reforms” are a direct attack on anti-corruption institutions, the weakening of the judiciary in Poland is still likely to have the longer-term effect of weakening efforts against corruption.

In Hungary, Fidesz’ latest supermajority victory in the April general election puts Viktor Orban’s government in an increasingly powerful position and able to act with greater impunity; this is worrying given the clout enjoyed by powerful businessmen close to the Hungarian premier. 

Even Estonia, which is consistently top ranked on the CPI among countries from the region, has come under scrutiny after revelations that up to €7bn was laundered via Danske Bank in Estonia, while the European Central Bank’s effectiveness has been questioned after scandals broke concerning money laundering the Latvian banking sector

Given this rather dismal picture, the achievements by Romania’s DNA under Kovesi were all the more impressive. Her dismissal and the simultaneous drastic undermining of the anti-corruption fight in Romania is therefore not just bad for Romania but for the wider East European region.

With additional reporting from Denitsa Koseva in Sofia and Carmen Simion in Bucharest.