Re­cidi­vism. The curse on Cyprus

Financial Mirror (Cyprus) - - FRONT PAGE -

The Anas­tasi­ades gov­ern­ment, and es­pe­cially Fi­nance Min­is­ter Haris Ge­or­giades, has worked some­thing of a mirac­u­lous turn­around in the state’s fi­nances and man­aged to exit the bailout pro­gramme in record time, given the grav­ity of the na­tion’s dire state in March 2013. The econ­omy is now sta­ble and there is a mood of op­ti­mism gen­er­ally in the pop­u­la­tion for a grad­ual im­prove­ment and strength­en­ing of the econ­omy. Although not yet com­plete, ma­jor struc­tural and pro­ce­dural re­forms are un­der­way in the pub­lic sec­tor and the banks. Although there is still some way to go, the at­ti­tude of of­fi­cials in deal­ing with cit­i­zens and cus­tomers has also shown a marked im­prove­ment and is now far more help­ful and re­spect­ful than in ear­lier years. To para­phrase for­mer UK Prime Min­is­ter Tony Blair, pub­lic sec­tor of­fi­cials are now ac­cept­ing that they are the ser­vants of the pub­lic not their mas­ter, i.e. the pub­lic do not ex­ist to pro­vide pub­lic ser­vants with a com­fort­able well-paid job.

More­over, the gov­ern­ment, through the com­bined ef­forts of the In­te­rior Min­is­ter, Au­di­tor Gen­eral and the At­tor­ney Gen­eral, has put into ef­fect one of Pres­i­dent Anas­tasi­ades’ early poli­cies on com­ing to power, namely the pur­suit of those en­gaged in fraud, cor­rup­tion and money laun­der­ing which was hav­ing such a dam­ag­ing ef­fect. For the first time in the Repub­lic’s his­tory, many of those ‘big shots’ who seemed to re­gard them­selves as un­touch­able and im­mune to in­ves­ti­ga­tion and pros­e­cu­tion have found them­selves in court, be­ing con­victed of se­ri­ous crim­i­nal of­fences and be­ing sent to jail for lengthy terms. Here, are a few re­cent and cur­rent ex­am­ples. - The Paphos Se­warage Board con­tracts fraud and cor­rup­tion case. For­mer mayor of Paphos Sav­vas Ver­gas con­victed in Fe­bru­ary 2015 along with sev­eral coun­cil em­ploy­ees, as­so­ciates, AKEL party of­fi­cials and oth­ers of bribery and money laun­der­ing over a 15 year pe­riod. Over EUR 1 mln in bribes were split be­tween Ver­gas and Efty­chios Malekides, the for­mer sew­er­age board head. Ver­gas was sen­tenced to six years in jail and oth­ers to vary­ing jail terms. May­ors in other mu­nic­i­pal­i­ties are now un­der sim­i­lar in­ves­ti­ga­tion and face crim­i­nal charges.

- The CYTA pen­sion fund fraud in­volv­ing land at Dro­mo­laxia. In Jan­uary 2015, the ex CYTA boss Stathis Kit­tis was sen­tenced to eight years in jail for fraud and cor­rup­tion, along with nu­mer­ous oth­ers who re­ceived sen­tences vary­ing from three to nine years. These in­cluded the for­mer direc­tor of CYTAVi­sion, Orestis Vasileiou, a for­mer head of the Elec­tric­ity Author­ity, Char­alam­bous Tsouris, an AKEL mem­ber, a CYTA union of­fi­cial, a Land Registry of­fi­cial and oth­ers.

- Christodou­los


for­mer Governer


the Cen­tral Bank of Cyprus, con­victed in Septem­ber 2014 on six counts of tax eva­sion and fined EUR 13,500 and sen­tenced to five months in jail. In July 2016, he was also charged along with the Greek fi­nancier An­dreas Vgenopou­los and five oth­ers and three com­pa­nies in re­la­tion to al­leged pay­ment of a EUR 1 mln bribe to him by the Zolotas com­pany.

- In De­cem­ber 2014, five for­mer se­nior of­fi­cials of the Bank of Cyprus, in­clud­ing the for­mer Chair­man of the Board, Theodoros Aris­tode­mou and four for­mer di­rec­tors, plus the Bank it­self as a cor­po­rate en­tity, were charged with crim­i­nal cul­pa­bil­ity in the Cyprus fi­nan­cial col­lapse of March 2013. The charges cen­tred on al­leged ma­nip­u­la­tion of the bank’s share price and al­leged mis­lead­ing state­ments to in­vestors on the cap­i­tal ad­e­quacy of the bank. A charge of con­spir­acy to de­fraud was later dropped. Other in­ves­ti­ga­tions re­lat­ing to the col­lapse of the for­mer Laiki Bank are on­go­ing. The case con­tin­ues.

As I noted in Risk Watch in De­cem­ber 2014, for a very long time, Cyprus has suf­fered from a per­ni­cious form of cor­rup­tion that goes far be­yond petty and even grand cor­rup­tion, namely ‘sov­er­eign cor­rup­tion’. Wide­spread col­lu­sion oc­curs over a very long pe­riod be­tween, on the one hand, un­eth­i­cal com­pa­nies and their bosses (for ex­am­ple, those en­gaged in whole­sale cheat­ing of cus­tomers, sup­pli­ers and/or the tax­payer) and, on the other hand, party hacks across the po­lit­i­cal spectrum and of­fi­cials of suc­ces­sive ad­min­is­tra­tions and lo­cal au­thor­i­ties. This is to the detri­ment of the pub­lic in­ter­est in gen­eral and par­tic­u­lar classes of per­son or cor­po­rate en­tity or par­tic­u­lar in­di­vid­u­als and or­gan­i­sa­tions. If the gov­ern­ment fails to rad­i­cally cor­rect the tainted sys­tem and the col­lu­sion, it cre­ates an im­pres­sion that cor­rup­tion has be­come an ac­cepted and in­sti­tu­tion­al­ized fact, i.e. an in­stru­ment of state pol­icy. That is sov­er­eign cor­rup­tion and it is es­sen­tially what the present gov­ern­ment is seek­ing to com­bat.

De­spite the valiant ef­forts of the gov­ern­ment over the past three years, there is much ob­ser­va­tional and anec­do­tal ev­i­dence that once the Troika bailout pro­gramme ended (and even be­fore), anti-re­form forces were al­ready at work. There is still a strong per­va­sive el­e­ment in so­ci­ety that wants, al­most des­per­ately so, to re­turn dou­ble quick time to the ‘good old ways’ (or bad old ways, de­pend­ing on your view). Reck­less bor­row­ing and debt de­fault at other peo­ple’s ex­pense is their metier. Demetris Ge­or­giades, Head of the Fis­cal Coun­cil, hit the nail on the head very re­cently when he said: “All those who be­lieve that the exit from the (bailout) pro­gramme will give the green light to re­turn to prac­tices of the past, will soon re­alise that this is not the case”. But, therein lies the prob­lem. There may well be no green light for that but the forces of re­cidi­vism are not tak­ing much no­tice.

An anec­do­tal ex­am­ple says it all. As re­ported to Risk Watch by some­one who was present, a small group of Cypriot de­vel­op­ers held an in­for­mal meet­ing at which they were jump­ing for joy now that the bailout pro­gramme was end­ing. How­ever, their joy was not just con­fined to see­ing the last of

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