The U.S. Embassy and corruption

By Donna K. Woodward

MEDAN, North Sumatra (JP): A reader recently asked in the "Letters" column of Dec. 28 why the United States Embassy has not referred any possible violations of the Foreign Corrupt Practices Act to the U.S. Department of Justice. One possible reason: lack of evidence. While admitting privately what payments they make, people rarely complain officially about corruption because of their fears of bureaucratic retaliation. This may seem hard to imagine for those who think Americans believe we're all-powerful. But when it comes to taking action against corrupt officials, American business executives tend to be no braver than the simple kampong tukangs or vendors who dare not repel a police officer's pressure for cigarette money...

As reader Collin Sinclair noted, American businesses are prohibited by the Foreign Corrupt Practices Act from paying bribes -- a prohibition some say would sorely hinder their competitiveness overseas, were it not so often honored in the breach. For some executives illegal payments are an inherent part of their modus operandi and success; they have little interest in terminating the mutually beneficial arrangements they have co- engineered with accommodating officials. Others feel coerced to make payments to survive within the system but would prefer not to. Yet they will not report the facts to Embassy officials. Why? Because Embassy officials do not want to hear about it and do not encourage people to report corruption.

Diplomats' accomplishments, their performance evaluations, their promotions and future assignments, depend in large part on their effectiveness with local government officials. Diplomats do not like having to confront or challenge their hosts; witness Soeharto's 32 years of praise from the diplomatic community, despite the universal awareness of his corruption and human rights violations. They chose to "See no Evil."

Diplomats do not like the distasteful business of going to a Trade and Industry Minister or a Minister of Mines or a Pertamina Director to say, "By the way, the American head of Company X is complaining that he cannot get the permit he needs; he says someone is waiting for his payment."

I know this because I myself have reported problems to my Embassy -- albeit small and low level problems -- without result. Two years ago a few Medan-based Americans reported problems to U.S. Embassy officers, but there was no follow up. Would anyone care to guess how likely those people will be to report other corruption to the Embassy? (This diplomatic neglect happened under the previous Ambassador. The current Deputy Chief of Mission has given his assurance that future complaints about demands for illegal payments would not be ignored by the Embassy.)

Some time ago former USAID consultant Jeffrey A. Winters turned the spotlight on corruption at the World Bank. Professor Winters also cited the U.S. multinational Freeport McMoran of Irian Jaya, in connection with alleged corrupt practices. Freeports' American CEO vehemently denied corruption in their Indonesian operations, with the disingenuous explanation that there couldn't possibly be corruption by an American corporation because corruption is against the law.

Last year Acehnese human rights workers accused Mobil Oil of providing bulldozers to the Indonesian Army -- bulldozers that were reportedly used to prepare mass graves for victims of military torture. No one is accusing Mobil Oil of having any criminal involvement in the deaths in Aceh. What the Mobil Oils and the Freeports and the international lenders do have is an interest in the smooth operations of their enterprises.

In the old Indonesia the way to ensure smooth operations was to maintain smooth relations with civilian and military authorities -- at all costs. When subtle solicitations were made for financial and material assistance, assistance was given. Sometimes the assistance was humanitarian, maybe a village medical clinic. Some requests seem questionable. A bulldozer for a military operation? From a private foreign corporation? Yet few questions were ever asked, and few requests, however questionable, were denied.

Business executives and officials of international organizations close their eyes to these and other more direct forms of corrupt practices in their operations, citing the cost- effectiveness of cooperation.

Corporate executives and international aid officials would be in a far better position to withstand unethical pressure if there were visible support from their Embassies. But anyone suggesting to a business executive that he/she look to the Embassy for help will be laughed out of the room. Where are our Embassy officials when we need support in refusing demands for illegal payments? No doubt we would be told that Embassy officials are working behind the scenes, quietly and indirectly, to make their consternation known where it counts. That, after all, is diplomacy. But if this is what is being done, it is not enough.

Can our Embassies continue to justify public silence in the face of the rampant corruption which still affects corporations, international aid organizations, and private individuals? True, our Embassies have many interests at stake in dealing with the Government of Indonesia; yes, they must maintain cordial relations; and yes, at times certain issues must take second place to other priorities.

Corruption, though, is an issue whose timeliness is indisputable. Some diplomats would hide behind the facade of "cultural sensitivity." But tolerance of corruption is not a sign of respect for Indonesian culture. Neither should speaking against corruption be confused with interfering in Indonesia's sovereignty. Objecting to corruption is not an improper intrusion upon another government's authority. Official corruption violates not only American law but also the laws of Indonesia.

Protecting overseas nationals from abuse of power by foreign government officials is traditionally among the most basic and important functions of all consular services. But when we face extortionist demands for payoffs, our Embassies seem to be in a Hear No Evil, See No Evil mode.

Until Embassies encourage citizens to report corruption, and aggressively follow up allegations of retaliation with high level Indonesian officials, there is little hope that individuals will prevail against corruption. If the U.S. Embassy is serious about fostering American corporate compliance with the Foreign Corrupt Practices Act, now is the time for the Ambassador to act.

If Ambassador Robert Gelbart is serious, he will appoint someone to handle complaints of violations of the Foreign Corrupt Practices Act (FCPA) just as Foreign Service Officers are assigned to handle other citizen services. The Embassy will encourage people to report the problems, detail by dirty little detail. Then, Mr. Sinclair, the U.S. Embassy might see those things that should be brought to the attention of the Department of Justice.

It may be reassuring to Mr. Sinclair to know that although Indonesia chose to safeguard the stability of its investment climate by honoring the Paiton power contract, this does not mean that American corporations cannot be investigated for their alleged violations of American laws.

The U.S. government might independently decide to look into the actions of the American members of the independent power producers bidding consortium. And President Abdurrahman Wahid might want to discuss with law experts the possibility under the FCPA of requiring the investigation by U.S. authorities of companies suspected of making illegal payments to procure contracts with Indonesian companies, if sufficient evidence can be gathered in Indonesia. Those who offered illegal payments should stand alongside those who demanded them, in the overall scheme to bring those guilty of corruption to justice.

The writer is an attorney and former American diplomat at the U.S. Consulate General in Medan, and president director of PT Far Horizons.