Governance Reform in the Philippines – Onward and Upward Reply

Today’s blog post is courtesy of Michelle Juan, the Regional Consultant of TRACE in the Asia Pacific. Previously she was General Counsel at the Araneta Group of Companies, and an attorney at Romulo Mabanta Buenaventura Sayoc & De los Angeles.  

© Government Press Office
© Government Press Office. Licensed by Creative Commons

This year, the Philippines celebrates the 28th anniversary of the 1986 People Power Revolution, a series of protests and mass actions aimed against electoral fraud, corruption, the suppression of civil liberties, and the widening gap between rich and poor during the 21 year regime of Ferdinand Marcos. The demonstrations took place on Epifanio de los Santos Avenue (EDSA) from 22-25 February 1986, and culminated in the exile of President Marcos and the restoration of democracy. Corazon C. Aquino, widow of slain opposition leader Benigo Aquino, Jr., was proclaimed the 11th President of the Philippines.

Despite EDSA and the return of democratic institutions, the road to reform has been difficult. In what was dubbed as EDSA II, President Joseph Estrada was removed from office in 2001 following a long drawn-out impeachment trial and allegations of large scale corruption in his administration (Transparency International’s 2004 Global Corruption Report estimated that Estrada embezzled US$70-80M during his abbreviated three year term). He was later convicted of plunder and sentenced to life imprisonment, but was pardoned by his successor, President Gloria Arroyo. Arroyo now herself faces corruption charges for alleged widespread misuse of government funds during her 9 year term. The former president, now a member of congress, has been under arrest since 2010.

In 2010, Benigno Aquino III, son of Corazon Aquino, was elected President. He ran on a reformist, anti-corruption platform, and his campaign battle cry was “Kung Walang Corrupt, Walang Mahirap” (“where there is no corruption, there is no poverty”).  Aquino has made good governance and anti-corruption the cornerstone of his administration’s agenda, and, in the last three years, has taken concrete steps to tackle corruption (particularly, judicial corruption) and ensure the independence and capacity of key oversight agencies.

Most notably, Chief Justice Renato Corona, a staunch ally of former President Arroyo, was impeached and removed from office in 2012 for failing to disclose over US$2M in foreign currency assets. Plunder charges have also been filed against 3 senators, 5 former congressmen, and 30 others allied with the Arroyo administration in the “pork barrel scam” –  a political scandal regarding alleged misuse of funds in the amount of PhP10 Billion (US$2.24M).

While anti-corruption efforts continue to face an uphill climb, it is largely conceded that the investment climate has improved, largely because the administration is perceived to take the need for institutional reform seriously. A 2013 World Bank report noted that the Philippines is now beginning to reap the benefits of political stability, a popular government, and governance reforms.

Indeed, as noted by the World Bank, one bright spot is the very active and vocal private sector, which takes the lead in promoting ethical practices and anti-corruption efforts. In particular, the business community has long understood that corruption not only exacerbates poverty, but also seriously undermines the Philippines’ long-term economic development prospects.

Recognizing these developments, TRACE International recently opened an office in Manila to meet the increasing demand for locally delivered anti-bribery compliance services. In addition, it partnered with the Makati Business Club (MBC) to help bring transparent business practices to the Philippine business community and promote a global anti-bribery and third party compliance standard, giving the private sector better tools to fight endemic corruption.

TRACE and MBC will be hosting an anti-corruption workshop on 30 April 2014, to cover a broad range of topics, including anti corruption enforcement actions in Asia, recent developments concerning the FCPA & UK Bribery Act, and compliance program best practices & risk assessments, among others.

POLL February, 2014: What was this month’s biggest anti-bribery story? Reply

  1. Thailand’s Prime Minister Charged with Corruption.   Thailand’s prime minister, Yingluck Shinawatra, was charged by Thai authorities for irregularities in the government’s rice buying scheme, under which the government was paying prices 50% higher than world prices. Following the high profile investigation, China canceled a deal to buy 1.2 million tons of rice in early February.
  2. Double Declination for Baxter.  Pharmaceutical company Baxter International announced that both the DOJ and SEC have completed their investigations and will not take further action.  Following a whistleblower complaint, the company investigated allegations and found improper expense payments by a Chinese joint venture in August 2013.
  3. Alstom Faces UK Bribery Charges After 5-year Probe.  Alstom, the French maker of trains and power equipment, will be charged in the U.K. over bribery allegations after a five-year investigation.  The U.K. is the latest country to charge Alstom following fines in France, Switzerland, Brazil and the U.S.
  4. Congress to Investigate Navy Bribery Scandal.  The House Oversight and Government Reform Committee opened an investigation into the unfolding Navy sex-and-bribery scandal following Rep. Darrell Issa’s concerns that the Navy’s investigations and reviews “will not go far enough.”  In return for paid travel and prostitutes, a naval commander allegedly sent classified information to a government contractor.
  5. Siemens Executives Ordered to Pay Largest Penalties Ever Levied Against Individuals. Two former Siemens executives were ordered to pay a combined $1.46 million for their roles in the Argentine government bribery scheme, the largest FCPA penalties ever levied against individuals.  U.S. District Judge Shira Scheindlin entered a default judgment, ordering each to pay a $524,000 civil penalty, and one to pay disgorgement of $413,957.

POLL January, 2014: What was this month’s biggest anti-bribery story? Reply

We’re back!  After a short hiatus in December, the monthly TRACE poll is back.  And so far 2014 has started out with a bang.  Vote for which story you think deserves the top spot:

  1. Brazil’s New Anti-Bribery Law Comes into Effect.   The law, passed last August, establishes direct civil liability for companies for the bribery of both domestic and foreign public officials.
  2. Alcoa settles Bahraini Bribe Scheme for $384 Million.  Alcoa’s subsidiaries allegedly used a London-based consultant, with connections to Bahrain’s royal family, as an intermediary to funnel illicit payments to Bahraini officials and their beneficiaries in order to retain Alcoa’s position as a supplier to a government-operated aluminum plant in Bahrain.
  3. Charles Duross Leaves US DOJ, Replaced by Patrick Stokes.  During his tenure as head of the Department of Justice’s FCPA Unit, the DOJ resolved more than 40 corporate bribery cases, which resulted in approximately $1.9 billion in monetary penalties and the conviction of more than two dozen business executives and money launderers.
  4. Turkish graft probe intensifies.  Several prominent businessmen close to the government and the sons of three ex-ministers have already been detained as part of the inquiry, and the government has purged scores of government employees within the Police Department and the judiciary.  Still, the inquiry has been marred by political infighting, and two prosecutors originally in charge of the investigation have already been removed from the case.
  5. Judge approves Weatherford Company’s $252 million FCPA settlement. – The Swiss-based oil services company allegedly falsified its books and records to conceal illicit payments, including exorbitant trips for government officials and their family members.  Weatherford’s Middle East subsidiary also allegedly made more than $1.4 million in improper payments to obtain contracts in the Iraqi Oil-for-Food program in 2002.
  6. New report highlights offshore tax havens of Chinese elite. A report by a team of media outlets led by the International Consortium of Investigative Journalists (ICIJ), revealed this month more than 37,000 tax haven clients from Greater China, including close relatives of some of China’s top Communist Party members.  While offshore accounts are not illegal per se, the report shows how far China’s anti-graft campaign has yet to go in curbing government corruption.

Human Trafficking in Supply Chains Reply

In honor of National Human Trafficking Awareness Day, January 11, TRACE wants to make you aware of the dangers of using trafficked labor in business.

Labor trafficking—the forced or coerced labor of vulnerable persons—can enter the supply chain through recruiters that provide workers for low-level facilities or labor.  As some companies have had to learn the hard way, the risks of labor trafficking increase exponentially as a company’s operations become more decentralized.  U.S.-based shipbuilder Signal International is currently standing trial in eighty-four individual cases alleging labor trafficking.  According to the complaints, the guest workers hired by Signal were charged “recruitment fees” of up to $20,000 in exchange for assistance in applying for and obtaining permanent residence in the U.S., but once the workers were in the U.S., agents threatened them with financial ruin and adverse immigration action if they attempted to leave.

While Signal is an egregious example, it is hardly the only company that has faced serious consequences from lack of oversight in labor recruitment.  The risks of using trafficked labor are widespread. Labor trafficking is a risk pervasive to all industries that use low-skilled laborers in their supply chains.  According to the Office of the High Commissioner for Human Rights, the sectors most at risk for trafficked labor include agriculture, construction, textiles, hospitality, and transportation.

There are two forms that trafficked labor generally takes—forced labor and debt bonded labor.  While forced labor, in which victims are forced to work against their will, is the common perception of trafficked labor, debt bonded labor is in fact the most widely used method used in labor trafficking.  Victims become bonded laborers when their labor is demanded as a means of repayment for a loan or service, for which the terms and conditions have not been defined or in which the reasonable value of the victims’ services is not applied toward the liquidation of the debt.  Because debt bonded laborers are not physically coerced into labor, they are more difficult to identify and prevent. Therefore, it is imperative that companies invest in adequate channel management.

Because regular training of staff is so important to make employees aware of the issues and to identify potential weak points for trafficked labor within channels, TRACE is launching a new online training module, free for TRACE member companies, that introduces employees to the risks of human trafficking. The TRACE Avoiding Trafficked Labor training module aims to help reduce trafficked labor in global supply chains as the first-ever training designed for the business community.

“Apart from its obvious horrors for its victims, human trafficking poses a real and serious threat to international business and the ethical and transparent practices that lead to a prosperous and healthy society. TRACE can help reduce trafficked labor in global supply chains with this first-ever online training course designed for the business community;  this practical training will help elevate awareness of the issue and will help employees identify the red flags associated with this hidden risk,” said TRACE President Alexandra Wrage.