EXECUTIVE ORDER NO.

268
 
 
CREATING THE NATIONAL ANTI-CORRUPTION COMMISSION AND ABOLISHING THE PRESIDENTIAL COMMISSION
AGAINST GRAFT AND CORRUPTION CREATED UNDER EXECUTIVE ORDER 151, S. 1994, AS AMENDED.
  
     Whereas, it has always been the avowed policy of the State, as enshrined in the constitutional principle that a public
office trust, to promote and maintain honesty and integrity in public service and to repress acts of public officers and private
persons alike which constitute graft and corrupt practices or which may lead thereto;

     Whereas, corrupt practices at all levels of the government are rooted in the past, have branched out and syndicated in the
executive, legislative and judicial branches of the government, and have become more serious and complicated with the
involvement of several mass media practitioners in the process;

     Whereas, despite the existence of many laws against graft and corruption, and the agencies legally and/or constitutionally
mandated to enforce these laws, corruption remains prevalent and at times criminally aggressive thereby posing a very
serious problem to the country and threat to the moral fabric of the Philippine society;

     Whereas, the present Administration seriously wants to put an end to graft and corruption which poses a very dangerous
threat to the moral and political existence of the Philippines as a nation; Whereas, new and effective administrative
mechanism designed to eradicate corruption and implement state of policy at the national level for the prevention and
control of corruption are therefore imperative and needs to be urgently established;

     Now, therefore, I, Joseph Ejercito Estrada, President of the Philippines, by virtue of the powers vested in me by the
Constitution, do hereby order the following:

    Section 1. Organization. -  There is hereby created a National Anti-Corruption Commission, hereinafter referred to as the
Commission, to implement and coordinate policy at the national level for the prevention, control of and ultimately
elimination of graft and corrupt practices at all levels of government by public officers and private persons alike. Acts or
omissions constituting graft and corrupt practices shall be as defined by Republic Act No. 3019, as amended, or as declared
unlawful by other existing laws. The Presidential Commission Against Graft and Corruption created and provided for under
Executive Order No. 151 dated 11 January 1994, as amended, is hereby abolished

    Sec. 2. Composition of the Commission.  - The Commission shall be headed by a full-time Chairman, who shall be assisted
by four (4) full-time Commissioners. They shall be appointed by the President from a list of nominees, known and
recognized for moral uprightness, probity and independence, proven competence and recognized expertise in their fields
related as much as possible to the functions of the Commission as cited in this Executive Order. All five (5) of them shall be
drawn from the public and private sectors.

    The Chairman shall have the rank, emoluments, and privileges of a Cabinet Secretary, or its equivalent. The
Commissioners, on the other hand, shall have the rank, emoluments, and privileges of an Undersecretary or its equivalent.

    In no case shall any member of the Commission appoint representatives to act on his behalf.

    Sec. 3. The Secretariat. - The Commission shall be initially assisted by an interim secretariat placed as its disposal by the
Development Academy of the Philippines thereinafter “DAP”.   DAP interim secretariat shall serve as such until a regular
organic secretariat shall have been organized by the Commission. The secretariat, interim and regular, shall also be
composed of individuals of known moral probity and dedication to public service.

    The Secretariat shall provide technical and administrative support to the Commission and shall be headed by an Executive
Director.

    The Executive Director shall be appointed by the Chairman. He or she shall interalia execute and administer the policies
and decisions of the Commission, attend the Commission’s deliberations, monitor the implementation of the programs
thereof, and manage the day-to-day operations thereof.
    In filling the positions for the interim secretariat of the Commission, the employees of the abolished Presidential
Commission Against Graft and Corruption (PCAGC) may be considered provided that they are especially qualified and have
demonstrated moral probity and dedication to public service without interruption of continued government service.

    PCAGC employees who will not be reconsidered shall be entitled to separation and retirement benefits provided under RA
8291, otherwise known as The GSIS Act of 1997, and other existing retirement rules and laws.
 
    Sec. 4. Functions of the Commission.  - The Commission shall perform the following functions:

(a) Formulate and implement national anti-corruption framework and program strategies and a corresponding action
agenda of the government in consultation with government agencies, private sector, and civil society organizations;
(b) Implement and coordinate policies aimed at preventing and combating corruption at all levels in the government and
preventing conflicts of interest;
(c) Undertake policy analysis and shepherd the passage of appropriate legislation geared towards the prevention, control,
and elimination of corruption for submission to and consideration by the President, who shall certify to Congress as urgent
appropriate legislative proposals that are vital to anti-corruption program;
(d) Monitor the performance of government agencies in the implementation of the action agenda, provide policy advise
thereto, and establish a centralized database for these purposes;
(e) Identify and investigate shortcomings and weaknesses in the organization and management of public administrators and
enterprises that could facilitate the commission of acts and misconduct covered by the existing laws against graft and
corruption and advise government departments/agencies, offices and local government units on anti-corruption strategies
and procedures for implementation;
(f) Pre-screen and clear appointees to be confirmed by the Commission on Appointments upon request of the President.
(g) Conduct sustained information and education drives aimed at preventing corruption and public misconduct;
(h)Organize specialized training of staff members of the Commission and representatives of private sector and civil society
in the prevention, investigation, and prosecution of graft and corrupt practices;
(i) Centralize information regarding acts and misconduct communicated to it by the policy services and public authorities
and by persons responsible for auditing the accounts or sent to it by private individuals;
(j) Investigate or hear, motu propio or on complaint filed with it in any form or manner, charges, reports, or information
involving the possible violation of graft and corrupt practices at all levels in government by public officers and private
persons alike
(k) Endorse to the Office of the Ombudsman or the Department of Justice for prosecution, any matter that the Commission,
after investigation upon complaint by any person or at its own instance, shall find to constitute graft and corrupt practices;
(l) Forward to judicial authorities any records, documents or information in its possession that the latter shall request in the
course of hearing and deciding acts that may constitute graft and corrupt practices;
(m) Render a periodic report on the progress of the anti-corruption program to the President, Congress and the general
public, with the end in view of providing all sectors a balanced and objective report on graft and corruption;
(n) Absorb the functions and exercise the jurisdiction and powers of the Presidential Commission Against Graft and
Corruption created and provided for under Executive Order No. 151, dated January 11, 1994, which for this purpose, is hereby
abolished.
    Sec. 5. Powers of the Commission. -
(a) The Commission shall have the following powers: The Commission is hereby granted the powers of an investigating body
under Section 37, Chapter 9, Book I of the Administrative Code of 1987 including the power to summon witnesses,
administer oaths, take testimony or evidence relevant to its investigation, and to issue compulsory process to produce
documents, books, records and such other matters in the performance of its functions.
Any person who, without lawful excuse, rails to appear upon summons issued under the authority of the preceding
paragraph or who, appearing before the Commission, refuses to take oaths, give testimony or produce documents for
inspection, when thereunto lawfully required, shall be subject to discipline as in the case of contempt of court upon
application of the Commission before the proper court, in the manner provided by law.
(b) The Commission may, in coordination with the Commission on Elections (COMELEC), verify the observance of the
ceiling on electoral expenditure and the accuracy of the election campaign accounts, assist in the investigation of palpable
and massive electoral fraud and monitor the actions of the different boards of canvassers during elections.
(c) The Commission may examine the execution of public contracts as to both tendering and results.
(d) The Commission may verify that award of public works and supply contracts and the assignment of operations by the
public authorities are conducted in a proper and honest matter.
(e)The Commission may undertake a lifestyle check on any public officer/employee. In this regard, the Commission:
1. May request copies of statement of asset and liabilities and income tax return of any person holding public office;
2. May require a person holding public office to reveal the source of his property, wealth, assets and interests, as well as
those of his or her spouse, departments and relatives, in accordance with law;
3. May require submission, by the person acting as its depository of the register of declarations of gift received by person
holding public offices;
4. In case of reasonable suspicion regarding the above, the Commission may seek to establish the reliability of such
declarations in cooperation with relevant national bodies.
(f) The Commission may seek the cooperation of the private sector, civil society and other bodies (local and international)
undertake anti-graft and corruption programs.
(g) The Commission shall coordinate with the Inter-agency Anti-Graft Coordinating Body for the purpose of effectively
implementing this Executive Order.
Sec. 6. Offenses covered. - For the purposes of this Executive Order, the Commission shall have jurisdiction to investigate
possible violations of any of the following:
(a)  Republic Act No. 3019, as amended, otherwise known as the “Anti-Graft and Corrupt Practices Act”;
(b) The provisions of Republic Act No. 1379 on the lawful acquisition of property by a public officer or employee;
(c)  Republic Act No. 6713, otherwise known as the “Code of Conduct and Ethical Standards for Public Officials and
Employees”;
(d) Section 46 (b) (1) to (6), Book V, Subtitle A, Chapter 6 of Executive Order No. 292, series of 1987, otherwise known as the
“Administrative Code of 1987”;
(e) Any provision under Title Seven of the Revised Penal Code on Crimes Committed by Public Officers;
(f) Executive Order No. 226, series of 1995;
(g) Any other relevant law, executive orders, rules and regulations.
    Sec. 7. The Commission shall promulgate or adopt its rules of procedure for the effective implementation of this Order.

    Sec. 8. Total support of other government units. - The Commission may call upon any government investigative and
prosecutorial agencies, including the National Bureau of Investigation and the Philippine National Police, to make available
their offices, personnel and facilities to attain the objectives of this Executive Order. The departments, bureaus, offices,
agencies, or instrumentalities including government-owned and controlled corporations are hereby directed to extend such
assistance and cooperation including detail and/or deputization of personnel as the Commission may need in the discharge
of its functions.

    Sec. 9. Referral to the Commission. - All offices, committees, commissions, bureaus, departments, and government-owned
or controlled corporations in the Executive Department are hereby directed to refer immediately to the Commission any
complaint, charge, report, or information of corruption against presidential appointees and non-presidential appointees
referred to under section 4 of this Executive Order. Such referral shall include not only the complaint, report or information
but also certified copies of all relevant and pertinent records of the case.

    Sec. 10. Organizational Units and Staffing. - The Commission may create organizational units necessary for the
performance of its functions, subject to relevant laws, rules and regulations. Such units shall be staffed by duly qualified
personnel appointed by the Executive Director upon approval of the Chairman.

    The Commission is also authorized to engage the services of resource persons, professionals and other personnel, known
for moral uprightness, probity and independence including a Commission Counsel, Deputy Commission Counsel(s) or such
other officials as may be required for the elective performance of its functions and responsibilities, to fix their duties and
compensation, to organize the structure and staffing pattern of the Commission: and to authorize the payment of honoraria
and/or allowances for deputized detailed officers and officials.
    The Commission shall be exempted from Administrative Order No. 100, Series of 1999. It may hire, at its discretion, new
personnel whether on a permanent, temporary, substitute, contractual, or casual status.

    Sec. 11. Compensation. - The Commission shall prepare its salary schedule in consultation with the Department of Budget
and Management.

    Sec. 12. Transitory Provisions. - The interim secretariat referred to under Section 3 of this Executive Order shall establish
the regular secretariat and ensure the orderly transition to the Commission within one (1) year upon approval of this
Executive Order.

    All the records, facilities, equipment, property, rights, and such other things arising from and incidental to the creation of
the Presidential Commission Against Graft and Corruption are hereby transferred to the Commission.

    Sec. 13. Appropriations. - The Commission shall have an initial budget of forty million pesos (P40,000,000.00) which shall
partly be drawn from the remaining budget of the abolished Presidential Commission Against Graft and Corruption and
from the Organizational Adjustment Fund. Appropriations for the succeeding years shall be incorporated in the budget
proposal for the Office of the President.

    Sec. 14. Repealing Clause. -  All orders, issuances, rules and regulations or parts thereof inconsistent with this Executive
Order are hereby repealed or modified accordingly.

    Sec. 15. Effectivity. - This Executive Order shall take effect immediately.

    Done in the City of Manila, this 18th of July, in year of Our Lord, two thousand.

 
 

By the President:
 
 
Ronaldo B. Zamora
Executive Secretary

Political corruption
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World map of the 2009 Corruption Perceptions Index by Transparency International, which measures "the degree to
which corruption is perceived to exist among public officials and politicians". High numbers (green) indicate less perception
of corruption, whereas lower numbers (red) indicate higher perception of corruption.

Political corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power
for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. Neither
are illegal acts by private persons or corporations not directly involved with the government. An illegal act by an officeholder
constitutes political corruption only if the act is directly related to their official duties.

Forms of corruption vary, but include bribery, extortion, cronyism, nepotism, patronage, graft, and embezzlement. While corruption
may facilitate criminal enterprise such as drug trafficking, money laundering, and human trafficking, it is not restricted to these
activities.
The activities that constitute illegal corruption differ depending on the country or jurisdiction. For instance, certain political funding
practices that are legal in one place may be illegal in another. In some cases, government officials have broad or poorly defined
powers, which make it difficult to distinguish between legal and illegal actions. Worldwide, bribery alone is estimated to involve over
1 trillion US dollars annually.[1] A state of unrestrained political corruption is known as a kleptocracy, literally meaning "rule by
thieves".

Effects

[edit] Effects on politics, administration, and institutions

Detail from Corrupt Legislation (1896) by Elihu Vedder. Library of Congress Thomas Jefferson Building, Washington, D.C.

Corruption poses a serious development challenge. In the political realm, it undermines democracy and good governance by flouting
or even subverting formal processes. Corruption in elections and in legislative bodies reduces accountability and distorts
representation in policymaking; corruption in the judiciary compromises the rule of law; and corruption in public administration
results in the inefficient provision of services. More generally, corruption erodes the institutional capacity of government as
procedures are disregarded, resources are siphoned off, and public offices are bought and sold. At the same time, corruption
undermines the legitimacy of government and such democratic values as trust and tolerance.

[edit] Economic effects

See also: Corporate crime

Corruption undermines economic development by generating considerable distortions and inefficiency. In the private sector,
corruption increases the cost of business through the price of illicit payments themselves, the management cost of negotiating with
officials, and the risk of breached agreements or detection. Although some claim corruption reduces costs by cutting red tape, the
availability of bribes can also induce officials to contrive new rules and delays. Openly removing costly and lengthy regulations are
better than covertly allowing them to be bypassed by using bribes. Where corruption inflates the cost of business, it also distorts the
playing field, shielding firms with connections from competition and thereby sustaining inefficient firms.

Corruption also generates economic distortions in the public sector by diverting public investment into capital projects where bribes
and kickbacks are more plentiful. Officials may increase the technical complexity of public sector projects to conceal or pave the way
for such dealings, thus further distorting investment. Corruption also lowers compliance with construction, environmental, or other
regulations, reduces the quality of government services and infrastructure, and increases budgetary pressures on government.

Economists argue that one of the factors behind the differing economic development in Africa and Asia is that in the former,
corruption has primarily taken the form of rent extraction with the resulting financial capital moved overseas rather invested at home
(hence the stereotypical, but often accurate, image of African dictators having Swiss bank accounts). In Nigeria, for example, more
than $400 billion was stolen from the treasury by Nigeria's leaders between 1960 and 1999. [2] University of Massachusetts researchers
estimated that from 1970 to 1996, capital flight from 30 sub-Saharan countries totaled $187bn, exceeding those nations' external debts.
[3]
(The results, expressed in retarded or suppressed development, have been modeled in theory by economist Mancur Olson.) In the
case of Africa, one of the factors for this behavior was political instability, and the fact that new governments often confiscated
previous government's corruptly-obtained assets. This encouraged officials to stash their wealth abroad, out of reach of any future
expropriation. In contrast, Asian administrations such as Suharto's New Order often took a cut on business transactions or provided
conditions for development, through infrastructure investment, law and order, etc.

[edit] Environmental and social effects

Corruption facilitates environmental destruction. Corrupt countries may formally have legislation to protect the environment, it cannot
be enforced if officials can easily be bribed. The same applies to social rights worker protection, unionization prevention, and child
labor. Violation of these laws rights enables corrupt countries to gain illegitimate economic advantage in the international market.

The Nobel Prize-winning economist Amartya Sen has observed that "there is no such thing as an apolitical food problem." While
drought and other naturally occurring events may trigger famine conditions, it is government action or inaction that determines its
severity, and often even whether or not a famine will occur. Governments with strong tendencies towards kleptocracy can undermine
food security even when harvests are good. Officials often steal state property. In Bihar, India, more than 80% of the subsidized food
aid to poor is stolen by corrupt officials. [4] Similarly, food aid is often robbed at gunpoint by governments, criminals, and warlords
alike, and sold for a profit. The 20th century is full of many examples of governments undermining the food security of their own
nations – sometimes intentionally.[5]

[edit] Effects on Humanitarian Aid

The scale of humanitarian aid to the poor and unstable regions of the world grows, but it is highly vulnerable to corruption, with food
aid, construction and other highly valued assistance as the most at risk. [6] Food aid can be directly and physically diverted from its
intended destination, or indirectly through the manipulation of assessments, targeting, registration and distributions to favour certain
groups or individuals.[6] Elsewhere, in construction and shelter, there are numerous opportunities for diversion and profit through
substandard workmanship, kickbacks for contracts and favouritism in the provision of valuable shelter material. [6] Thus while
humanitarian aid agencies are usually most concerned about aid being diverted by including too many, recipients themselves are most
concerned about exclusion.[6] Access to aid may be limited to those with connections, to those who pay bribes or are forced to give
sexual favours.[6] Equally, those able to do so may manipulate statistics to inflate the number beneficiaries and syphon of the additional
assistance.[6]

[edit] Other areas: health, public safety, education, trade unions, etc.
See also: Police corruption

Corruption is not specific to poor, developing, or transition countries. In western European countries, there have been cases of bribery
and other forms of corruption in all possible fields: under-the-table payments made to reputed surgeons by patients willing to be on
top of the list of forthcoming surgeries, bribes paid by suppliers to the automotive industry in order to sell poor quality connectors
used for instance in safety equipment such as airbags, bribes paid by suppliers to manufacturers of defibrillators (to sell poor quality
capacitors), contributions paid by wealthy parents to the "social and culture fund" of a prestigious university in exchange for it to
accept their children, bribes paid to obtain diplomas, financial and other advantages granted to unionists by members of the executive
board of a car manufacturer in exchange for employer-friendly positions and votes, etc. Examples are endless. These various
manifestations of corruption can ultimately present a danger for the public health; they can discredit certain essential institutions or
social relationships.

Corruption can also affect the various components of sports activities (referees, players, medical and laboratory staff involved in anti-
doping controls, members of national sport federation and international committees deciding about the allocation of contracts and
competition places).

There have also been cases against (members of) various types of non-profit and non-government organisations, as well as religious
organisations.

Ultimately, the distinction between public and private sector corruption sometimes appears rather artificial and national anti-
corruption initiatives may need to avoid legal and other loopholes in the coverage of the instruments.

[edit] Types

[edit] Bribery
Main article: Bribery

A bribe is a payment given personally to a government official in exchange of his use of official powers. Bribery requires two
participants: one to give the bribe, and one to take it. Either may initiate the corrupt offering; for example, a customs official may
demand bribes to let through allowed (or disallowed) goods, or a smuggler might offer bribes to gain passage. In some countries the
culture of corruption extends to every aspect of public life, making it extremely difficult for individuals to stay in business without
resorting to bribes. Bribes may be demanded in order for an official to do something he is already paid to do. They may also be
demanded in order to bypass laws and regulations. In addition to using bribery for private financial gain, they are also used to
intentionally and maliciously cause harm to another (i.e. no financial incentive). In some developing nations, up to half of the
population has paid bribes during the past 12 months.[7]

In recent years, efforts have been made by the international community to encourage countries to dissociate and incriminate as
separate offences, active and passive bribery. Active bribery can be defined for instance as the promising, offering or giving by any
person, directly or indirectly, of any undue advantage [to any public official], for himself or herself or for anyone else, for him or her
to act or refrain from acting in the exercise of his or her functions. (article 2 of the Criminal Law Convention on Corruption (ETS
173) of the Council of Europe). Passive bribery can be defined as the request or receipt [by any public official], directly or indirectly,
of any undue advantage, for himself or herself or for anyone else, or the acceptance of an offer or a promise of such an advantage, to
act or refrain from acting in the exercise of his or her functions (article 3 of the Criminal Law Convention on Corruption (ETS 173)).
The reason for this dissociation is to make the early steps (offering, promising, requesting an advantage) of a corrupt deal already an
offence and, thus, to give a clear signal (from a criminal policy point of view) that bribery is not acceptable. Besides, such a
dissociation makes the prosecution of bribery offences easier since it can be very difficult to prove that two parties (the bribe-giver
and the bribe-taker) have formally agreed upon a corrupt deal. Besides, there is often no such formal deal but only a mutual
understanding, for instance when it is common knowledge in a municipality that to obtain a building permit one has to pay a "fee" to
the decision maker to obtain a favourable decision. A working definition of corruption is also provided as follows in article 3 of the
Civil Law Convention on Corruption (ETS 174): For the purpose of this Convention, "corruption" means requesting, offering, giving
or accepting, directly or indirectly, a bribe or any other undue advantage or prospect thereof, which distorts the proper performance
of any duty or behaviour required of the recipient of the bribe, the undue advantage or the prospect thereof.

[edit] Governmental corruction of judiciary

Governmental corruction of judiciary includes governmental spending on the courts, which is completely financially controlled by the
executive in many transitional and developing countries. This undermines the principle of checks and balances and creates a critical
financial dependence on the judiciary. It covers latent governmental spending on the judiciary in the form of privileges – cars, country
houses,expenses. Such a system is completely outside the realm of transparency and creates a precedent for the corruption of the
judiciary by executive authorities.

[edit] Trading in influence

Trading in influence, or influence peddling in certain countries, refers to the situation where a person is selling his/her influence over
the decision process involving a third party (person or institution). The difference with bribery is that this is a tri-lateral relation. From
a legal point of view, the role of the third party (who is the target of the influence) does not really matter although he/she can be an
accessory in some instances. It can be difficult to make a distinction between this form of corruption and certain forms of extreme and
poorly regulated lobbying where for instance law- or decision-makers can freely "sell" their vote, decision power or influence to those
lobbyists who offer the highest retribution, including where for instance the latter act on behalf of powerful clients such as industrial
groups who want to avoid the passing of certain environmental, social, or other regulations perceived as too stringent, etc. Where
lobbying is (sufficiently) regulated, it becomes possible to provide for a distinctive criteria and to consider that trading in influence
involves the use of "improper influence", as in article 12 of the Criminal Law Convention on Corruption (ETS 173) of the Council of
Europe.

[edit] Patronage
Main article: Patronage

Patronage refers to favoring supporters, for example with government employment. This may be legitimate, as when a newly elected
government changes the top officials in the administration in order to effectively implement its policy. It can be seen as corruption if
this means that incompetent persons, as a payment for supporting the regime, are selected before more able ones. In nondemocracies
many government officials are often selected for loyalty rather than ability. They may be almost exclusively selected from a particular
group (for example, Sunni Arabs in Saddam Hussein's Iraq, the nomenklatura in the Soviet Union, or the Junkers in Imperial
Germany) that support the regime in return for such favors. A similar problem can also be seen in Eastern Europe, for example in
Romania, where the government is often accused of patronage (when a new government comes to power, in a few months time it
changed most of the officials in the public sector).

[edit] Nepotism and cronyism

Main articles: Nepotism and Cronyism

Favoring relatives (nepotism) or personal friends (cronyism) of an official is a form of illegitimate private gain. This may be combined
with bribery, for example demanding that a business should employ a relative of an official controlling regulations affecting the
business. The most extreme example is when the entire state is inherited, as in North Korea or Syria. A milder form of cronyism is an
"old boy network", in which appointees to official positions are selected only from a closed and exclusive social network – such as the
alumni of particular universities – instead of appointing the most competent candidate.

Seeking to harm enemies becomes corruption when official powers are illegitimately used as means to this end. For example,
trumped-up charges are often brought up against journalists or writers who bring up politically sensitive issues, such as a politician's
acceptance of bribes.

In the Indian political system, leadership of national and regional parties are passed from generation to generation creating a system in
which a family holds the center of power, some examples are most of the dravidian parties of south India and also the largest party in
India - Congress.
Electoral fraud
Main article: Electoral fraud

Electoral fraud is illegal interference with the process of an election. Acts of fraud affect vote counts to bring about an election result,
whether by increasing the vote share of the favored candidate, depressing the vote share of the rival candidates, or both. Also called
voter fraud, the mechanisms involved include illegal voter registration, intimidation at polls, and improper vote counting.

Embezzlement
Main article: Embezzlement

Embezzlement is outright theft of entrusted funds. It is a misappropriation of property.

Another common type of embezzlement is that of entrusted government resources; for example, when a director of a public enterprise
employs company workers to build or renovate his own house.

Kickbacks

A kickback is an official's share of misappropriated funds allocated from his or her organization to an organization involved in corrupt
bidding. For example, suppose that a politician is in charge of choosing how to spend some public funds. He can give a contract to a
company that is not the best bidder, or allocate more than they deserve. In this case, the company benefits, and in exchange for
betraying the public, the official receives a kickback payment, which is a portion of the sum the company received. This sum itself
may be all or a portion of the difference between the actual (inflated) payment to the company and the (lower) market-based price that
would have been paid had the bidding been competitive. Kickbacks are not limited to government officials; any situation in which
people are entrusted to spend funds that do not belong to them are susceptible to this kind of corruption. Kickbacks are also common
in the pharmaceutical industry, as many doctors and physicians receive pay in return for added promotion and prescription of the drug
these pharmaceutical companies are marketing. (See: Anti-competitive practices,

Unholy alliance

An unholy alliance is a coalition among seemingly antagonistic groups, especially if one is religious,[8] for ad hoc or hidden gain. Like
patronage, unholy alliances are not necessarily illegal, but unlike patronage, by its deceptive nature and often great financial resources,
an unholy alliance can be much more dangerous to the public interest. An early, well-known use of the term was by Theodore
Roosevelt (TR):

"To destroy this invisible Government, to dissolve the unholy alliance between corrupt business and corrupt politics is the
first task of the statesmanship of the day." – 1912 Progressive Party Platform, attributed to TR[9] and quoted again in his
autobiography[10] where he connects trusts and monopolies (sugar interests, Standard Oil, etc.) to Woodrow Wilson,
Howard Taft, and consequently both major

Involvement in organized crime

An illustrative example of official involvement in organized crime can be found from 1920s and 1930s Shanghai, where Huang
Jinrong was a police chief in the French concession, while simultaneously being a gang boss and co-operating with Du Yuesheng, the
local gang ringleader. The relationship kept the flow of profits from the gang's gambling dens, prostitution, and protection rackets
undisturbed.

The United States accused Manuel Noriega's government in Panama of being a "narcokleptocracy", a corrupt government profiting on
illegal drug trade. Later the U.S. invaded Panama and captured Noriega.

Conditions favorable for corruption

This section is in a list format that may be better presented using prose. You can help by converting this section to prose, if
appropriate. Editing help is available. (December 2009)

It is argued that the following conditions are favorable for corruption:

 Information deficits
o Lack of government transparency.
o Lacking freedom of information legislation. The Indian Right to Information Act 2005 has "already engendered
mass movements in the country that is bringing the lethargic, often corrupt bureaucracy to its knees and changing
power equations completely."[11]
o Lack of investigative reporting in the local media.
o Contempt for or negligence of exercising freedom of speech and freedom of the press.
o Weak accounting practices, including lack of timely financial management.
o Lack of measurement of corruption. For example, using regular surveys of households and businesses in order to
quantify the degree of perception of corruption in different parts of a nation or in different government
institutions may increase awareness of corruption and create pressure to combat it. This will also enable an
evaluation of the officials who are fighting corruption and the methods used.
o Tax havens which tax their own citizens and companies but not those from other nations and refuse to disclose
information necessary for foreign taxation. This enables large scale political corruption in the foreign nations. [12]
[citation needed]

 Lacking control of the government.

o Democracy absent or dysfunctional. See illiberal democracy.
o Lacking civic society and non-governmental organizations which monitor the government.
o An individual voter may have a rational ignorance regarding politics, especially in nationwide elections, since each
vote has little weight.
o Weak civil service, and slow pace of reform.
o Weak rule of law.
o Weak legal profession.
o Weak judicial independence.
o Lacking protection of whistleblowers.
o Lack of benchmarking, that is continual detailed evaluation of procedures and comparison to others who do similar
things, in the same government or others, in particular comparison to those who do the best work. The Peruvian
organization Ciudadanos al Dia has started to measure and compare transparency, costs, and efficiency in different
government departments in Peru. It annually awards the best practices which has received widespread media
attention. This has created competition among government agencies in order to improve. [13]
 Opportunities and incentives
o Individual officials routinely handle cash, instead of handling payments by giro or on a separate cash desk—
illegitimate withdrawals from supervised bank accounts are much more difficult to conceal.
o Public funds are centralized rather than distributed. For example, if $1,000 is embezzled from a local agency that
has $2,000 funds, it is easier to notice than from a national agency with $2,000,000 funds. See the principle of
subsidiarity.
o Large, unsupervised public investments.
o Sale of state-owned property and privatization.[citation needed]
o Poorly-paid government officials.
o Government licenses needed to conduct business, e.g., import licenses, encourage bribing and kickbacks.
o Long-time work in the same position may create relationships inside and outside the government which encourage
and help conceal corruption and favoritism. Rotating government officials to different positions and geographic
areas may help prevent this; for instance certain high rank officials in French government services (e.g. treasurer-
paymasters general) must rotate every few years.
o Costly political campaigns, with expenses exceeding normal sources of political funding, especially when funded
with taxpayer money.
o Less interaction with officials reduces the opportunities for corruption. For example, using the Internet for sending
in required information, like applications and tax forms, and then processing this with automated computer
systems. This may also speed up the processing and reduce unintentional human errors. See e-Government.
o A windfall from exporting abundant natural resources may encourage corruption. [14] (See Resource curse)
o War and other forms of conflict correlate with a breakdown of public security.
 Social conditions
o Self-interested closed cliques and "old boy networks".
o Family-, and clan-centered social structure, with a tradition of nepotism/favouritism being acceptable.
o A gift economy, such as the Chinese guanxi or the Soviet blat system, emerges in a Communist centrally planned
economy.
 o In societies where personal integrity is rated as less important than other characteristics (by contrast, in societies
such as 18th and 19th century England, 20th century Japan, and post-war western Germany, where society
showed almost obsessive regard for "honor" and personal integrity, corruption was less frequently seen) [citation needed]
o Lacking literacy and education among the population.
o Frequent discrimination and bullying among the population.

Relation to economic freedom

According to a study of the conservative think tank The Heritage Foundation, lack of economic freedom explains 71% of
corruption[15]: the poorer the Index of Economic Freedom, the more corruption there is in a country. Below is a list of examples of
governmental activities that limit economic freedom, create opportunities for corruption (incentives for individuals and/or companies
to buy privileges or favors worth of money, from politicians or officials), and have in recent economic history also led to corruption:

 Licenses, permits, etc.

 Foreign trade restrictions. Officials may then, e.g., sell import or export permits.
 Credit bailouts.
 State ownership of utilities and natural resources. 'In analyzing India's state-run irrigation system, professor Shyam Kamath
- - wrote: Public-sector irrigation systems everywhere are typically plagued with cost and time overruns, endemic
inefficiency, chronic excess demands, and widespread corruption and rent seeking.'
 Access to loans at below-market rates. In Chile, '$4.6 billion was awarded to government banks in direct subsidies through
"soft" loans' between 1940 and 1973.[15]

Size of public sector

It is a controversial issue whether the size of the public sector per se results in corruption. As mentioned above, low degree of
economic freedom explains 71% of corruption. The actual share may be even greater, as also past regulation affects the current level
of corruption due to the slowing of cultural changes (e.g., it takes time for corrupted officials to adjust to changes in economic
freedom).[16] The size of the public sector in terms of taxation is only one component of economic un-freedom, so the empirical studies
on economic freedom do not directly answer this question.

Extensive and diverse public spending is, in itself, inherently at risk of cronyism, kickbacks, and embezzlement. Complicated
regulations and arbitrary, unsupervised official conduct exacerbate the problem. This is one argument for privatization and
deregulation. Opponents of privatization see the argument as ideological. The argument that corruption necessarily follows from the
opportunity is weakened by the existence of countries with low to non-existent corruption but large public sectors, like the Nordic
countries.[17] However, these countries score high on the Ease of Doing Business Index, due to good and often simple regulations, and
have rule of law firmly established. Therefore, due to their lack of corruption in the first place, they can run large public sectors
without inducing political corruption.

Like other governmental economic activities, also privatization, such as in the sale of government-owned property, is particularly at
the risk of cronyism. Privatizations in Russia, Latin America, and East Germany were accompanied by large scale corruption during
the sale of the state owned companies. Those with political connections unfairly gained large wealth, which has discredited
privatization in these regions. While media have reported widely the grand corruption that accompanied the sales, studies have argued
that in addition to increased operating efficiency, daily petty corruption is, or would be, larger without privatization, and that
corruption is more prevalent in non-privatized sectors. Furthermore, there is evidence to suggest that extralegal and unofficial
activities are more prevalent in countries that privatized less.[18]

There is the counter point, however, that oligarchy industries can be quite corrupt ( "competition" like collusive price-fixing,
pressuring dependent businesses, etc. ), and only by having a portion of the market owned by someone other than that oligarchy, i.e.
public sector, can keep them in line ( if the public sector gas company is making money & selling gas for 1/2 of the price of the private
sector companies... the private sector companies won't be able to simultaneously gouge to that degree & keep their customers: the
competition keeps them in line ). Private sector corruption can increase the poverty/helplessness of the population, so it can affect
government corruption, in the long-term.

In the European Union, the principle of subsidiarity is applied: a government service should be provided by the lowest, most local
authority that can competently provide it. An effect is that distribution of funds into multiple instances discourages embezzlement,
because even small sums missing will be noticed. In contrast, in a centralized authority, even minute proportions of public funds can
be large sums of money.
Governmental corruption

If the highest echelons of the governments also take advantage from corruption or embezzlement from the state's treasury, it is
sometimes referred with the neologism kleptocracy. Members of the government can take advantage of the natural resources (e.g.,
diamonds and oil in a few prominent cases) or state-owned productive industries. A number of corrupt governments have enriched
themselves via foreign aid, which is often spent on showy buildings and armaments.

A corrupt dictatorship typically results in many years of general hardship and suffering for the vast majority of citizens as civil society
and the rule of law disintegrate. In addition, corrupt dictators routinely ignore economic and social problems in their quest to amass
ever more wealth and power.

The classic case of a corrupt, exploitive dictator often given is the regime of Marshal Mobutu Sese Seko, who ruled the Democratic
Republic of the Congo (which he renamed Zaire) from 1965 to 1997. It is said that usage of the term kleptocracy gained popularity
largely in response to a need to accurately describe Mobutu's regime. Another classic case is Nigeria, especially under the rule of
General Sani Abacha who was de facto president of Nigeria from 1993 until his death in 1998. He is reputed to have stolen some
US$3–4 billion. He and his relatives are often mentioned in Nigerian 419 letter scams claiming to offer vast fortunes for "help" in
laundering his stolen "fortunes", which in reality turn out not to exist. [19] More than $400 billion was stolen from the treasury by
Nigeria's leaders between 1960 and 1999.[20]

More recently, articles in various financial periodicals, most notably Forbes magazine, have pointed to Fidel Castro, General
Secretary of the Republic of Cuba since 1959, of likely being the beneficiary of up to $900 million, based on "his control" of state-
owned companies.[21] Opponents of his regime claim that he has used money amassed through weapons sales, narcotics, international
loans, and confiscation of private property to enrich himself and his political cronies who hold his dictatorship together, and that the
$900 million published by Forbes is merely a portion of his assets, although that needs to be proven.[22]

Fighting corruption

Mobile telecommunications and radio broadcasting help to fight corruption, especially in developing regions like Africa,[23] where
other forms of communications are limited.

In the 1990s, initiatives were taken at an international level (in particular by the European Community, the Council of Europe, the
OECD) to put a ban on corruption: in 1996, the Committee of Ministers of the Council of Europe, for instance, adopted a
comprehensive Programme of Action against Corruption and, subsequently, issued a series of anti-corruption standard-setting
instruments:

 the Criminal Law Convention on Corruption (ETS 173);

 the Civil Law Convention on Corruption (ETS 174);
 the Additional Protocol to the Criminal Law Convention on Corruption (ETS 191) ;
 the Twenty Guiding Principles for the Fight against Corruption (Resolution (97) 24) ;
 the Recommendation on Codes of Conduct for Public Officials (Recommendation No. R (2000) 10) ; and
 the Recommendation on Common Rules against Corruption in the Funding of Political Parties and Electoral Campaigns
(Rec(2003)4)

The purpose of these instruments was to address the various forms of corruption (involving the public sector, the private sector, the
financing of political activities, etc.) whether they had a strictly domestic or also a transnational dimension. To monitor the
implementation at national level of the requirements and principles provided in those texts, a monitoring mechanism - the Group of
States Against Corruption (also known as GRECO) was created.

Further conventions were adopted at the regional level under the aegis of the Organization of American States (OAS or OEA), the
African Union, and in 2003, at the universal level under that of the United Nations.

Whistleblowers
Main article: Whistleblower

Campaign contributions

In the political arena, it is difficult to prove corruption. For this reason, there are often unproved rumors about many politicians,
sometimes part of a smear campaign.
Politicians are placed in apparently compromising positions because of their need to solicit financial contributions for their campaign
finance. If they then appear to be acting in the interests of those parties that funded them, this gives rise to talk of political corruption.
Supporters may argue that this is coincidental. Cynics wonder why these organizations fund politicians at all, if they get nothing for
their money.

Laws regulating campaign finance in the United States require that all contributions and their use should be publicly disclosed. Many
companies, especially larger ones, fund both the Democratic and Republican parties. Certain countries, such as France, ban altogether
the corporate funding of political parties. Because of the possible circumvention of this ban with respect to the funding of political
campaigns, France also imposes maximum spending caps on campaigning; candidates that have exceeded those limits, or that have
handed in misleading accounting reports, risk having their candidacy ruled invalid, or even being prevented from running in future
elections. In addition, the government funds political parties according to their successes in elections.

In some countries, political parties are run solely off subscriptions (membership fees).

Even legal measures such as these have been argued to be legalized corruption, in that they often favor the political status quo. Minor
parties and independents often argue that efforts to rein in the influence of contributions do little more than protect the major parties
with guaranteed public funding while constraining the possibility of private funding by outsiders. In these instances, officials are
legally taking money from the public coffers for their election campaigns to guarantee that they will continue to hold their influential
and often well-paid positions.

The development of Corruption Free Politics by the Agenda 2058 Foundation in South Africa, has been the turning point in the war
against political corruption.[citation needed] Indeed by removing the need for donations, state subsidies and other gratuities, the WNPC's (as
Agenda 2058 calls them) enable political solvency, political autonomy, and remove the need for the grey money, which ordinarily is
condoned on the basis of campaign finance needs. For more information read www.agenda2058.org.

As indicated above, the Committee of Ministers of the Council of Europe recognised in 1996 the importance of links between
corruption and political financing. It adopted in 2003 the Recommendation on Common Rules against Corruption in the Funding of
Political Parties and Electoral Campaigns (Rec(2003)4). This text is quite unique at international levels as it aims i.a. at increasing
transparency in the funding of political parties and election campaigns (these two areas are difficult to dissociate since parties are also
involved in campaigning and in many countries, parties do not have the monopoly over the presentation of candidates for elections),
ensuring a certain level of control over the funding and spending connected with political activities, and making sure infringements are
subject to effective, proportionate, and dissuasive sanctions. In the context of its monitoring activities, the Group of States Against
Corruption has identified a great variety of possible improvements in those areas (see the country reports adopted under the Third
Evaluation Round).

[edit] Measuring corruption

Measuring corruption statistically is difficult if not impossible due to the illicit nature of the transaction and imprecise definitions of
corruption.[24] While "corruption" indices first appeared in 1995 with the Corruption Perceptions Index, all of these metrics address
different proxies for corruption, such as public perceptions of the extent of the problem.[25]

Transparency International, an anti-corruption NGO, pioneered this field with the Corruption Perceptions Index, first released in 1995.
This work is often credited with breaking a taboo and forcing the issue of corruption into high level development policy discourse.
Transparency International currently publishes three measures, updated annually: a Corruption Perceptions Index (based on
aggregating third-party polling of public perceptions of how corrupt different countries are); a Global Corruption Barometer (based on
a survey of general public attitudes toward and experience of corruption); and a Bribe Payers Index, looking at the willingness of
foreign firms to pay bribes. The Corruption Perceptions Index is the best known of these metrics, though it has drawn much
criticism[25][26][27] and may be declining in influence.[28]

The World Bank collects a range of data on corruption, including survey responses from over 100,000 firms worldwide and a set of
indicators of governance and institutional quality. Moreover, one of the six dimensions of governance measured by the Worldwide
Governance Indicators is Control of Corruption, which is defined as "the extent to which power is exercised for private gain, including
both petty and grand forms of corruption, as well as 'capture' of the state by elites and private interests." [29] While the definition itself is
fairly precise, the data aggregated into the Worldwide Governance Indicators is based on any available polling: questions range from
"is corruption a serious problem?" to measures of public access to information, and not consistent across countries. Despite these
weaknesses, the global coverage of these datasets has led to their widespread adoption, most notably by the Millennium Challenge
Corporation.[24]

In part in response to these criticisms, a second wave of corruption metrics has been created by Global Integrity, the International
Budget Partnership, and many lesser known local groups, starting with the Global Integrity Index, first published in 2004. These
second wave projects aim not to create awareness, but to create policy change via targeting resources more effectively and creating
checklists toward incremental reform. Global Integrity and the International Budget Partnership each dispense with public surveys and
instead uses in-country experts to evaluate "the opposite of corruption" – which Global Integrity defines as the public policies that
prevent, discourage, or expose corruption.[30] These approaches compliment the first wave, awareness-raising tools by giving
governments facing public outcry a checklist which measures concrete steps toward improved governance. [24]

Typical second wave corruption metrics do not offer the worldwide coverage found in first wave projects, and instead focus on
localizing information gathered to specific problems and creating deep, "unpackable" content that matches quantitative and qualitative
data. Meanwhile, alternative approaches such as the British aid agency's Drivers of Change research skips numbers entirely and favors
understanding corruption via political economy analysis of who controls power in a given society.[24]

Corruption in the education sector

The U4 theme page on corruption in the education sector provides essential resources about the challenges posed by corruption in
the sector with a focus on development cooperation and the implementation of aid projects.