Dennis Jones is a Jamaican-born international economist, who has lived most of the time in the UK and USA, and latterly in Guinea, west Africa. He moved back to the Caribbean in 2007. This blog contains his observations on life on this small eastern Caribbean island, as well as views on life and issues on a broader landscape, especially the Caribbean and Africa.







**You may contact me by e-mail at livinginbarbados[at]gmail[dot]com**

Thursday, February 19, 2009

Why We Need To Know About Politicians' Assets

A very good reason to argue for politicians to disclose their assets is to remove as much as possible the taint of possible conflicts of interest. I stress possible. More generally, one should have complete confidence that a politician's decisions are as neutral as possible. I hope that we are not so naive as to believe that politicians are not capable of being influenced. They are humans, not gods, and they have personal feelings that are both good and bad. They have friends and enemies. But, we want to feel a sense of assurance that these things come to bear as little as possible. Now, we know that politicians can be very partisan and it's bad enough to see a politician working to favour his/her party supporters in the constituency, while doing things to discriminate against those who favour or voted for the opposition.

The recent financial troubles befalling CL Financial Group's Trinidad operations and now the levelling of fraud charges amount to US$ 8 billion by the US Securities and Exchange Commission against Allan Stanford and his Antigua-registered Stanford Financial Group point to one aspect of the possible conflicts in our own back yard. To what extent are politicians personally tied to the ailing institution or those who run them? To the extent that such ties exist, how has it affected or will it affect political and policy decisions? The Antiguan government was very cozy with Mr. Stanford, and with elections now set for next month, that may have a very bad bearing on the outcome for the ruling party. Barbados' former central bank governor,is on the Board. With Mr. Stanford going AWOL (reportedly in St. Croix, US Virgin Island), the trail to find him and his assets may lead to some unwelcome doors. The parallels with the Madoff scam are immediate: steady returns (though by offering a 'certificate of deposit' such steadiness is less odd); using an obscure accounting firm (three men and no dog), called CAS Hewlett--originally run from Antigua--to check his books; claiming substantial analytical and research backing for investments, etc. Stanford's bank, fittingly some would say, lost money in the Madoff scam.

The public can ask legitimately the question, "If my politician is/has been the beneficiary of payments from company X (or its head), can I expect that politician to deal impartially with issues to do with company X (or its head)?" Or, very simply, "If my politician has substantial investments with company X, how do I determine that his/her actions are not motivated by self-interest?" In places like the US and UK, politicians are obliged to distance themselves from their investments or controlling interests, or at least be seen to do. This could come in the form of 'blind trusts', for example, which handle investments while the politicians' hands are supposedly freed of such control.

Former US Vice President, Dick Cheney, is an interesting study. He was Chairman of the Board and Chief Executive Officer (CEO) of Halliburton, a Fortune 500 company and market leader in the energy sector. Mr. Cheney resigned as CEO of Halliburton on July 2000, when he became vice president; he argued that this step removed any conflict of interest. Mr. Cheney's net worth, estimated to be between US$30 million and US$100 million, is largely derived from his post at Halliburton, as well as the Cheneys gross income of nearly US$9 million. However, Mr. Cheney had headed President Bush II's vice-presidential search committee in 2000, while still head of Halliburton. President Bush then surprised some by asking Mr. Cheney himself to join the Republican ticket. Halliburton's contracts with the US government during the Iraq war always raise questions about the links with Mr. Cheney, remembering that he had also been Secretary of Defence under President Bush I (in the 1990s). Awkward to say the least. Time (and the disclosure of currently classified information) will tell to what extent Mr. Cheney and his connections had a bearing on important decisions of the last Bush administration.

If I understand the workings of many administrative and legal processes, decision makers can recuse themselves when their discussion or decision has a bearing on a related company (or person). This is good, but is not easy to monitor if one does not know of asset ownership or relationships. Facts may come out later that could embarrass the decision maker. In the Stanford case, the list of political contributions has already led Congressman Charlie Rangel to offer to pay over US$ 10,000 to a charity, representing a contribution he received from Stanford. That gesture alone does not do all the washing needed to make Mr. Rangel clean, because there is still the question of what did Mr. Rangel do for Mr. Stanford, if anything, as a 'sign of appreciation' for the generous contribution?

As the Madoff and Stanford cases unfold many will try to be wise after the event and a host of actions will now seem to be clear signs of fraud or other wrong doing, but at the time they were either seen and ignored or not seen (see Bloomberg report on some of the 'creative' marketing of Stanford).

Americans, who were the main target as customers, are now alerted to the problems of investments with Stanford. For them, a good system exists for getting information disclosed and investigative procedures are very well developed. Very little will not be uncovered. In the Caribbean we are not so blessed. We have lots of sunshine but we rarely get good light to shine on controversial issues, especially if 'big people' are involved. Our deference is legend and our unwillingness to make people answer to obvious charges of wrong doing or irresponsibility is also legend: we will wait to see what comes from another Antiguan debacle in the form of the botch up over the cricket test match that had to be abandoned. A Japanese politician resigns for being accused of drunkenness at a recent press conference. Imagine a Caribbean politician doing the same. We do not see 'wrongness' the same as others.

As we in the region look at images of people in Antigua lining up to withdraw deposits from Bank of Antigua we may say "Oh, Lord, thank you for keeping my money safe." The indications are that our region's BoA (domestic bank) is not directly linked to Standford International Bank Ltd. (offshore), which is the focus of the US authorities' charges. The East Caribbean Central Bank's Governor was quick to state that BoA is 'sound' and warned depositors to not precipitate problems by hastily withdrawing their funds (see Barbados Advocate report). Nevertheless, fear reigned and long lines formed to do just that, according to reports I have seen and heard. People reportedly flew to Antigua to hastily try to get their hands on their money. No Internet banking? An acquaintance of mine in Antigua, who is in property development, told me that he managed to get out all of his money; he was a lucky one as an asset freeze is supposed to be in place. In his words, "Waited from sunrise - 7 hours at Scamford bank to get money. I was one of the few that got through. This has been a long time coming, for those that watch international news it comes as no surprise, interesting that my actions were alerted from UK, and my exact dress was described in real time from those in UK. Scary! But thankful. Best n Bless."

It is interesting that the Venezuelan government was quick to take over the Venezuelan arm of Standford's bank as line formed of hopeful depositors wanting their money. Other Latin American governments have done the same and more may follow, given about half of the investors in Stanford were from that region, and Venezuelans alone invested some US$3 billion (see Wall Street Journal report). The drug money laundering charges now surfacing may be one factor behind this.

Who knows what really goes on in 'smoke-filled rooms' or gets discussed at the golf or tennis club, or is resolved in the bathrooms between people who are closely connected. When a friend who is also in a position of power calls a politician late at night, or any time, it is rarely just to check on what was eaten for dinner or what shirt is being worn. It's about something felt to be substantial. Where you have extensive record-keeping of officials' actions, as in say the US political system, there is a record of almost everything, so it's a wonder how a politician can hope to keep anything untoward hidden. We, again, do not have all of that paraphernalia. So, we need a lot more of the 'honour system'. Part of that is a willingness to say openly and honestly what is owned and how was it obtained; what is earned and for doing what, etc. Tom Daschle, who recently had to withdraw from nomination as President Obama's Secreatary of Health over unpaid taxes raised questions about himself too when people heard about the money he earned from consulting and speeches after losing his Senate seat. Former President Clinton had to disclose a lot of information about the funding of his foundations and his income sources in order for his wife, then Senator Hillary Clinton, to pass muster as nominee for Secretary of State. Was there a possible risk of the links with Bill being seen as intruding on American foreign policy?

Caribbean people like to keep their business private. We tend to bridle at what we see as 'meddling with our things'. Just look at the disgusted reactions when we are searched at Immigration and our distaste for people rummaging through our belongings. Cricket World Cup was as much a failure because of a lack of understanding of our intolerance for being searched, especially when we are 'convinced' that we are not hiding anything. That view tends to extend to a tolerance of our leaders keeping their business private, even if much of it is publicly known: "Yes, that's the big man's house. He built it for his sweetheart. Sure, his wife knows about how he's always fooling around with that other woman; look how the children have his nose. But you know how it is, man."

No politician should have anything to hide from the populace. If such a thing exists, then it must be a threat to the politician's good judgement. If he/she messes with underage boys/girls in public bathrooms and that is illegal then he/she better look out. If he/she consorts with prostitutes or criminals then he/she better be prepared to explain why there is unlikely to be any undue influence exerted by these nefarious relations. If moneys earned are for anything other than legitimate billable hours then let's hear why they are alright. No one should be immune from such questioning if they are public servants, and no amount of high dudgeon and running out of radio studios instead of answering the question will cut it. Sure, the declarations can be false, and we should do whatever we can to make that possibility less. Poor old Senator Roland Burris now has to reconcile what he said under oath with what he is now saying openly. The law will work its way, but the politician should avoid that having to be the only way that the public gets to see what is behind the person. Usually, if it gets to the legal stage then things are already sour. So, keep things sweet.

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