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Investigative body to help corruption fight

State officials tasked with fighting corruption have said plans to create a body to investigate 100 billion crowns in bad loans extended by state banks is a sign of the government's commitment to ensuring wider observance of the rule of law in Slovak society.
The plan, which was put forward jointly last week by the Finance and Interior Ministries, reflects its authors' belief that a single institution is needed to investigate the bad loans, and to bring to justice to those suspected of criminal activities in extending the loans.
The bad credits were cut out of the lending portfolios of three major state banks in 1999 and transferred to 'hospital' bank Slovenská Konsolidačná (SKo). Until now, the state and SKo have paid more attention to creating reserves for the debt than identifying who created it.


The launch of the National Fight Against Corruption campaign in February 2000. Market watchers say the battle against white-collar crime has never really taken off.
photo: TASR

State officials tasked with fighting corruption have said plans to create a body to investigate 100 billion crowns in bad loans extended by state banks is a sign of the government's commitment to ensuring wider observance of the rule of law in Slovak society.

The plan, which was put forward jointly last week by the Finance and Interior Ministries, reflects its authors' belief that a single institution is needed to investigate the bad loans, and to bring to justice to those suspected of criminal activities in extending the loans.

The bad credits were cut out of the lending portfolios of three major state banks in 1999 and transferred to 'hospital' bank Slovenská Konsolidačná (SKo). Until now, the state and SKo have paid more attention to creating reserves for the debt than identifying who created it.

According to Mário Virčík, a coordinator of the government's National Fight Against Corruption campaign, plans for the new body show the cabinet is serious about battling corruption, and showing citizens that wrongdoers will not be allowed to escape justice.

"By doing this we're displaying our willingness not just to fight corruption, but also to tackle the wider problem of getting society to accept the rule of law," he said.

"Corruption exists in every country. What we are doing with this is bringing attention to a wider issue. We have to show people that criminals are being taken to task for what they've done, because if we don't there's no way we can tell people they must respect the law."

But market analysts say the business sector has already been overrun by white-collar crime, and that whatever prosecutions the body's creation may bring, they won't be enough to check corporate sector malfeasance.

"The government hasn't done anywhere near enough. Its fight against corruption has fallen away, and public administration reform is now the hot topic of the day, not what they were promising at the start of their term. So much more could have been done," said Mário Blaščák, analyst at Ľudová banka.

The Mikuláš Dzurinda government pledged to fight corruption at all levels of society when it came to power in October 1998, and announced the launch of its national anti-corruption programme in February last year. But the plans have been criticised by corruption watchdog Transparency International as vague, and are also behind schedule, with specific anti-corruption measures not approved by individual ministries until November last year.

Business leaders now say the corporate sector remains as corrupt as it was before Dzurinda's coalition came to power, and recent research supports their claims. According to a survey of 90 countries conducted by Transparency International in Germany, Slovakia last year ranked 52nd in the 'corruption perception index' (CPI) at 3.5 (10 signifying a corruption free economy, 0 indicating total corruption). In 1998 it was 47th with a CPI of 3.9, and in 1999 53rd with 3.7.

Part of the problem, government leaders have said, is that the country's overburdened and inefficient legal system has made it almost impossible to take decisive action against financial crime. The length of time some cases spend in the judicial system waiting to be brought to court has been criticised by a host of institutions, including the International Monetary Fund (IMF), World Bank and the EU.

With the courts too slow, critics of the planned investigative body say successful prosecutions of bank fraud could take years.

Even the process of declaring a company bankrupt can, some creditors complain, take more than two years. Over 6,000 bankruptcy cases are pending in courts despite a rise in the numbers of successful bankruptcy proceedings from 224 in 1997 to 2,400 at the end of last year.

Corruption within the judiciary has also been faulted for the legal hold-ups. A World Bank survey last year showed that Slovak courts ranked only second behind the banking sector in perceived levels of corruption.

Thus, while banking sector management has taken it upon itself to lay charges in some potential fraud cases, few are expecting wonders from the new investigative body.

"I'm not going to be holding my breath to see if everyone gets punished," said one senior source in the banking sector.

"If you had to punish everyone who had committed a crime you'd have half the country in jail. Getting everyone convicted [in connection with loan corruption] just isn't going to happen," the source added.

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